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After almost two and a half years of sobering news, the head of
JPMorgan Chase raised his outlook for the rest of 2010 as first-quarter income
rose 55 percent.

Jamie Dimon, JPMorgan’s chairman and chief executive, said that
there were strong signs the economy was stabilizing as fewer borrowers fall
behind on their loans.

“While the economy still faces challenges, there have been clear
and broad-based improvements in underlying trends,” he said in a statement. “We
believe these improvements will continue and are hopeful they will gather
momentum.” Mr. Dimon’s upbeat remarks come as the bank had another strong
showing as a sharp reduction in loan loss reserves helped raise earnings. Hefty
trading profits in the investment bank once again helped offset the weaker
performance of its Chase retail banking and credit card units.

Over all, JPMorgan said its first-quarter income was $3.3
billion, or 74 cents a share. That compared with income of $2.1 billion, or 40
cents a share, a year earlier as profit surged in the months after following
the crisis. Revenue, at $28.2 billion, exceeded forecasts.

Emerging from recession

Analysts surveyed by Thomson Reuters had forecast income of 64
cents a share on revenue of $26.46 billion. As one of the first banks to report
this quarter, JPMorgan’s results could set a benchmark for the rest of the
financial industry.

Bank of America, Goldman Sachs, Morgan Stanley, and Citigroup
all report in the coming week. Investors will be looking for signs that fewer
borrowers are defaulting on their loans – and that the underlying business is
improving.

“We continued to see delinquencies stabilize, and in some cases
improve, in our credit portfolios,” Mr. Dimon said. Of course, Mr. Dimon noted,
the bank’s portfolio will track the health of the broader economy.

Even as the country emerges from a deep recession, the job
market has not yet rebounded. Demand for new loans is still weak. Meanwhile,
there are only tentative signs that home prices are nearing a bottom.

And JPMorgan’s problems are not yet over. The bank set aside
several billion dollars to cover future losses reserves – still a large sum but
a smaller amount than in prior quarters. It has now stockpiled a total of $39
billion, or roughly 5.6 percent of loans. The bank also set aside another $2.3
billion in additional litigation reserves as it deals with fierce legal fights
over faulty mortgages and a pitched battle with Washington Mutual bondholders
over that company’s remnants.

Surviving the crisis

JPMorgan has emerged from the crisis in better shape than most
of its peers, which suffered bruising losses or a devastating blow to their
reputation, or in many cases, both. Today, no bank – and no bank leader – is
showing more confidence on Wall Street or in Washington, where JPMorgan is
aggressively fending off a consumer protection agency and seeking big
exemptions from derivatives rules.

The investment bank unit posted strong trading revenue after a
first quarter rally in the fixed-income markets, though well short of the
blow-out profits during the first quarter last year. It did not fair as well in
dispensing merger advice, though that business was down across the industry.

Chase’s consumer businesses, however, are still hemorrhaging
money. And stealing a page out of the Citigroup playbook, Mr. Dimon divided his
Chase retail banking business into two segments for reporting purposes: its
existing operations, which will continue to grow; and a holding tank for its
most troubled loans.

© The New York Times