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JPMorgan Chase, Wells Fargo post record third-quarter numbers

NEW YORK — JPMorgan Chase, the country's biggest bank, reported a record quarterly profit Friday, helped by a surge in mortgage refinancing. CEO Jamie Dimon said he believed the housing market "has turned a corner."

The bank made $5.3 billion from July through September, up 36 percent from the same period a year ago. It worked out to $1.40 per share, easily outpacing the $1.21 predicted by analysts polled by FactSet, a provider of financial data.

Revenue rose 6 percent to $25.9 billion, beating expectations of $24.4 billion. Earnings were also helped because the bank set aside less money for bad loans — $1.8 billion, down 26 percent from a year ago.

Revenue from mortgage loans shot up 29 percent. About three-quarters of that was from people refinancing, rather than buying new homes. Low interest rates and government help encouraged homeowners to refinance.

The bank gave few details on the surprise $6 billion trading loss that dominated its previous earnings report. It did mention that a credit portfolio moved to the investment bank from the chief investment office, which was responsible for the bad trade, "experienced a modest loss."

The bank set aside an extra $684 million for legal expenses. Chief financial officer Doug Braunstein said the reserves were related to "a variety of issues," and not just a lawsuit filed last week by the New York attorney general over mortgage-backed securities sold by Bear Stearns. JPMorgan bought Bear Stearns as it veered toward collapse in 2008.

Dimon said he couldn't predict how much the bank would have to spend in the future.

JPMorgan's investment banking unit earned more in fees for underwriting stock offerings and debt offerings, which could signal that wary companies and investors are more willing to get back into the market.

Debit card revenue fell, which the bank attributed to new rules crimping the fees that banks charge stores whenever customers pay via debit card.

The bank's revenue was slightly lower, $25.1 billion, when adjusted for a controversial accounting rule that penalizes banks when the bonds they issue to investors look safer and rise in value.

The theory behind the rule, in place since 2007, is that it would cost banks more to buy those bonds back from investors. The rule has been sharply criticized by the banking industry, including by Dimon, and could be phased out as early as next year.

Record profit

for Wells Fargo

Wells Fargo posted record earnings in the third quarter as the bank increased mortgage lending and pocketed more fees. Wells, the nation's biggest mortgage lender, expanded its loan portfolio by making new loans to consumers and collected more interest on loans than in the same period a year earlier. Wells' net income in the quarter rose 23 percent, to $4.72 billion from $3.84 billion in the same period last year. Overall revenue rose 8 percent to $21.21 billion. Fees from the bank's booming mortgage business also added to its revenue. Wells said it originated $139 billion of mortgage loans, up from $89 billion in last year's third quarter. More homeowners refinanced at record-low mortgage rates.

Other banks to report

The country's other big banks will report quarterly earnings next week. Citigroup's earnings will be released Monday, followed by Goldman Sachs on Tuesday, Bank of America on Wednesday and Morgan Stanley on Thursday.

Third-quarter earnings

What JPMorgan Chase and Wells Fargo made from July through September.

JPMorgan Chase

July-September revenue

$25.9 billion

July-September

net income

$5.3 billion

Wells Fargo

July-September revenue

$21.2 billion

July-September

net income

$4.72 billion

JPMorgan Chase, Wells Fargo post record third-quarter numbers 10/12/12 [Last modified: Friday, October 12, 2012 10:11pm]
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