Thursday, April 16, 2009

JP Morgan Earnings Vs GGP Bankruptcy

JP Morgan posted that profit it has been promising on the heels of Vikram Pandit’s leaked “we’re actually making a profit” memo in early March. JP reported $2.14 billion in profit, or 40 cents a share, beating analysts consensus of 32 cents a share. The bulk of the profits came from fixed income trading which added $4.9 billion in profits to the investment bank’s total take of $8.3 billion. In the “troubling” department, credit loss provisions nearly doubled to $8.6 billion, rising 18% from the fourth quarter. Credit card default rates surged to 7.72% from 5.56% in the fourth quarter and 4.37% in the prior year’s first quarter, while charge-offs rose to 4.9%. Can JP, in addition to all the banks, continue to out-earn their charge-offs and credit loss provisions with fixed income trading profits? The market seems to think so for the moment, having bid up JP’s shares to nearly double their price a mere month ago. I have my doubts.

Meanwhile, in Retail REIT World, General Growth Properties finally filed for bankruptcy protection. I suppose that debt investors have finally grown weary of not receiving interest payments and pushed the company to file Chapter 11. The company’s stock had been trading around $1, so this has not been too much of a surprise. What may come as a surprise to investors is the actual value of the REIT’s assets, which were listed in the filing at $29.3 billion versus liabilities of $27 billion. Anybody want to buy a mall? I hear they might be selling at a discount.

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