JPMorgan Chase has posted miserable
full-year consumer banking results for fiscal 2009 with a near
profits wipeout – down from $880 million in 2008 to $97 million –
at its Retail Financial Services (RFS) unit.
Despite Chase’s retail woes, group-wide it
reported full year net profits of $11.73 billion, more than double
the $5.61 billion earned in fiscal 2008 and well ahead of analyst
forecasts.
Go deeper with GlobalData
Other key retail banking and cards services
metrics included:
• A full-year loss of $2.22 billion at Chase’s
card unit compared with net profits of $780 million in 2008;
• Credit card sales down by 31 percent
year-on-year;
• A 3 percent fall in retail deposits to
$329.8 billion;
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By GlobalData• RFS net charge-offs more than doubling to
$10.1 billion from $4.9 billion in 2008;
• Consumer lending lost $3.81 billion within
the RFS business unit; and
• A cut in the Chase branch banking network
from 5,474 units at the end of 2008 to 5,154 outlets at the end of
2009.
In contrast to the cut in branch numbers,
Chase has successfully grown its internet channel with an increase
of almost one-third in active online customers – from 11.7 million
at the end of 2008 to more than 15.4 million a year later.
CFO Michael Cavanagh told analysts the fall in
retail deposits was explained by “high-cost Washington Mutual
certificates of deposit maturing and rolling off, which is good
economics for us”.
Good news was totally absent at the card unit,
with a fourth-quarter loss of $306 million and charge-off ratio of
8.64 percent.
Cavanagh said further bad news for the card
arm was ahead, with the charge-off ratio expected to move towards
10.5 percent in the first half of 2010.
Mortgage metrics at the Chase RFS unit were
similarly gloomy compared to a year ago:
• Home equity net charge-offs in fiscal 2009
almost doubled to $4.7 billion, with a charge off rate of 4.52
percent (2008 figures: $2.4 billion and 2.67 percent);
• Subprime net charge-offs rose to $1.64
billion and a charge-off rate of 14.01 percent (2008 figures: $0.93
billion and 8.08 percent); and
• Prime mortgage net charge-offs more than
trebled to $1.89 billion and a charge-off rate of 3.81 percent
(2008 figures: $0.52 billion and 1.20 percent).
|
Performance |
|||
|
JPMorgan Chase – fundamentals, |
|||
|
2009 |
2008 |
% change |
|
|
Total net revenue ($bn) |
100.4 |
67.2 |
49.4 |
|
Pre-provision profit ($bn) |
48.1 |
23.8 |
102.0 |
|
Provision for credit losses ($bn) |
32.0 |
21.0 |
52.4 |
|
Group net profits ($bn) |
11.72 |
5.61 |
108.9 |
|
Total group assets ($trn) |
2.03 |
2.17 |
-6.4 |
|
Consumer loans ($trn) |
0.94 |
1.01 |
-6.9 |
|
Retail deposits ($bn) |
329.8 |
339.8 |
-3.0 |
|
Number of branches |
5,154 |
5,474 |
-5.8 |
|
Number of ATMs |
15,406 |
14,568 |
5.7 |
|
Business unit net |
|||
|
Retail Financial Services ($m) |
97 |
880 |
-88.9 |
|
Card Services ($bn) |
-2.22 |
0.78 |
n/m |
|
Investment bank ($bn) |
6.89 |
-1.17 |
n/m |
|
Corporate/private equity ($bn) |
3.03 |
0.56 |
444 |
|
Source: JPMorgan Chase |
|||
Net profit every quarter of
2009
Almost all of Chase’s fiscal 2009
earnings came from just two units, with its investment banking and
corporate/private equity arms reporting net profits of $6.9 billion
and $3.0 billion respectively.
It also had the distinction of reporting a net
profit for every quarter in 2009 with fourth quarter net income of
$3.3 billion more than four times the $702 million earned in the
corresponding quarter last year.
While the retail and card results squashed
hopes of consumer credit being on the mend, Chase CEO Jamie Dimon
said loan delinquency rates were improving and credit card spending
was on the rise.
But in a conference call with analysts, he
said: “We don’t know when the recovery is. While we are seeing some
stability in delinquencies, consumer credit costs remain high, and
weak employment and home prices persist. Accordingly, we remain
cautious.”
He also flagged up a number of successes in 2009, such as
completion of the Washington Mutual integration.
An increase in the RFS unit’s net interest
margin was also worthy of note, up by 12 basis points to 3.06
percent at the end of the fourth quarter – compared to 2.94 percent
in the fourth quarter of 2008 – reflecting a more disciplined
pricing strategy and shift to wider-spread deposit products.
Retail product successes in the past 12 months
included:
• 1.2 million net new checking accounts were
opened to total 25.7 million at the end of the year;
• Branch sales of investment products
increased 48 percent compared to 2008;
• Branch sales of mortgages were up 161
percent year-on-year; and
• Auto originations up 111 percent
year-on-year.
“We are gratified that we generated earnings
of $3.3 billion for the fourth quarter and nearly $12 billion for
the year. Though these results showed improvement, we acknowledge
that they fell short of both an adequate return on capital and the
firm’s earnings potential,” said Dimon.
Flagging up the strength of the Chase balance
sheet, he said: “We ended 2009 with a very strong Tier 1 capital
ratio of 11.1 percent and a Tier 1 common ratio of 8.8
percent.”
