In the midst of one of the nation's worst credit crises, JPMorgan Chase and Wells Fargo managed to report better-than-expected third-quarter...
NEW YORK — In the midst of one of the nation’s worst credit crises, JPMorgan Chase and Wells Fargo managed to report better-than-expected third-quarter results on Wednesday. But even two of the country’s strongest banks proved they are not immune to the widespread credit problems plaguing their peers.
Both banks reported sharp declines in profit as they took hits on investments and increased their credit reserves to prepare for troubles ahead. But given the waning economy and the current shake-up in the markets, the credit problems did not come as a surprise to most analysts. While many remain cautious of the worsening economy, analysts generally viewed the results as positive.
“If you look at the reports today, there is no surprise that they ran into some more credit issues,” said Michael Sheldon, chief strategist at RDM Financial Group. “Overall, the long-term growth story remains a positive in the eyes of investors.”
JPMorgan Chase, which bought Seattle’s Washington Mutual last month and Bear Stearns in March, earned $527 million, or 11 cents per share, in the period ended Sept. 30. That was down 84 percent from $3.4 billion, or 97 cents per share, a year earlier. Analysts polled by Thomson Reuters, on average, had predicted a loss of 21 cents per share.
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Wells Fargo, whose pending purchase of Wachovia puts it squarely in the top ranks of U.S. banking, reported a 25 percent profit decline. The San Francisco-based bank earned $1.64 billion, or 49 cents per share, compared with $2.17 billion, or 64 cents per share, in the prior-year quarter. Analysts had expected a profit of 41 cents per share.
The reports follow that of Bank of America, which saw its profit fall 68 percent to $1.18 billion, or 15 cents per share, down from $3.7 billion, or 82 cents per share, in the same period last year. That was much lower than analysts’ estimates of 62 cents per share.
Citigroup — the last of the top four banks to report — will release its results today.
Investors sent shares of Wells Fargo down 17 cents to $33.35 on Wednesday, as the broader market tumbled. JPMorgan shares dropped $2.22 to $38.49.
“JPMorgan also has a larger investment-banking division that Wells Fargo doesn’t have; they have additional issues that Wells Fargo doesn’t have to deal with,” Sheldon said.