JP Morgan investment banking reports record profits

Today, JP Morgan reported that it earned $2.14 billion in the first quarter of 2009, a decline from the corresponding period last year when it saw a net income of $2.4 billion.

The investment banking division aided results as the bank benefited from a record net income of $4.9 billion within its fixed-income markets division, up from $466 million in the first quarter of 2008. According to JP Morgan, the result was driven by record profits in credit trading, emerging markets and rates, and healthy returns in currencies. It also saw a gain of $422 million from the widening of the bank's credit spread on select structured liabilities.

In total, the investment banking division generated a record net revenue of $8.3 billion and a record profit of $1.6 billion.

Despite the positive showing, certain parts of the bank's business were still hurt by the deterioration in market conditions. JP Morgan marked down $711 million in leveraged loans and unfunded commitments, as well as $214 on mortgage-related exposures; it also added $4.2 billion to credit reserves. The bank's non-performing assets rose to $14.7 billion at the end of the quarter, up from the prior year's level of $5.1 billion.

The bank's Tier I capital ratio was 11.3% on March 31. This figure stood at 9.2% when excluding funds received from the Troubled Assets Relief Program. Tangible common equity totalled $87.2 billion in the quarter.

Chief executive Jaime Dimon warned that economic conditions might warrant further increases to loan-loss reserves. "It is reasonable to expect additional increases to credit reserves if the economic environment worsens. Yet we are confident that even a highly adverse economic scenario would not compromise our overall strength and stability - or our ability to enhance our franchises."

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