J.P. Morgan Chase (NYSE: JPM) Offers Mixed Bag in Earnings Report

The good news in J.P. Morgan Chase’s (JPM) first-quarter earnings report came from strong results in their credit card, commercial banking, and asset management businesses.

In addition to a first-quarter profit that shattered expectations, the bank reported deposit growth of 4%, a 14% lift in mortgage originations and a 21% decrease in non-performing loans.

The bad news was that their mortgage servicing division and related foreclosure cleanup costs remain a problem.

When you put it all together, J.P. Morgan reported a first-quarter profit of $5.6 billion, or $1.28 a share, which was a 67% increase from 2010.

On the flip side, revenue fell 8% to $25.8 billion.

Wall Street analysts were expecting the banking giant to make $1.16 a share on revenue of $25 billion.

While reporting a nearly $2 billion hit in the value of their mortgage servicing division and foreclosure cleanup costs, CEO Jamie Dimon conceded that the problems tied to the bank’s mortgage business will continue to be a drag on performance at its giant retail financial services business.

“Unfortunately, these losses will continue for a while,” Dimon said in a press release. “Rest assured, we are fully engaged in fixing our problems and addressing our mistakes from the past, and we will strive to build the best mortgage business going forward.”

Offsetting those losses, the bank released $2 billion from its reserve for bad credit card loans.

Profits at the nation’s largest banks are expected to fall after their rapid ascent in 2009. One factor trimming profit margins is a wave of hiring by financial firms to bulk up for the next wave of growth in areas like commodities and futures.

And, banks are also conserving capital to deal with the still uncertain regulatory environment. Though many regulations will be watered down or delayed, as in the case of the debit card fee regulation proposed in the Dodd-Frank bill, some of the banks’ most lucrative businesses, such as derivatives trading, could be threatened.

“We believe that a strong regulatory environment is essential, and we are working hard to ensure that we meet all the new rules and requirements, both in letter and spirit,” Dimon said Wednesday.

Other factors affecting profits included rising compensation, a slowly recovering economy and a lack of trading.

Despite this a first-quarter profit of over $5.5 billion is impressive. And that makes the report, in all, a good one for J.P. Morgan. It’s in contrast to the sluggish performance of like-sized rivals Bank of America Corp. (BAC) and Citigroup Inc. (C).

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