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J.P. Morgan Chase, Wells Fargo earnings slip

Jeremy Simon

In the latest earnings announcements from major U.S. credit card issuers, both J.P. Morgan Chase and Wells Fargo said their net income declined in the fourth quarter, even as both banks appeared to avoid the full impact of the subprime meltdown.

At J.P. Morgan’s Chase banking division, earnings increased despite more than quadrupling reserves for credit losses to $1.05 billion.

Within the regional banking division, branch sales of credit cards rose 34 percent from the year before.

“For the nation’s banks, the subprime-mortgage crisis that began this summer was just the start of trouble that has bled over into the consumer sector, affecting credit card spending and corporate debt as the U.S. economy has taken a turn for the worse,” The Wall Street Journal said. Still, “J.P. Morgan seems to have weathered most of the havoc in the banking sector.”

That sentiment was supported by comments from the bank’s CEO, with Chairman and Chief Executive Jamie Dimon noting in the earnings release that “the diversified nature of our company helped offset areas of weakness.”

Meanwhile, Wells Fargo’s net income included the addition of $1.4 billion pre-tax credit reserve, as revenue climbed to a record level.

“Credit card charge-offs increased $47 million in the quarter, about one-third of which was due to growth,” said Chief Credit Officer Mike Loughlin. “After having been at uncharacteristically low levels, card charge-off rates increased to 5 percent in the fourth quarter and were largely in line with industry standards, reflecting some stress on the consumer.”

Even banks that avoided the full force of the credit woes will still need to remain vigilant. As J.P. Morgan’s Dimon said, “We remain extremely cautious as we enter 2008.”

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  • Credit Balance

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