While Citi and BofA are getting taken to the woodshed for double secret probation, JPMorgan Chase is showing record revenue of $25.6 billion and a large profit of $2.7 billion. As profit is up 36% from a year earlier and 27% from just last quarter, you can see that JPM is now firing on all cylinders.
The contrast between the performance at JPMorgan Chase and Goldman, who reported Tuesday and the beating that BofA and Citi are taking at the hands of regulators demonstrates which big banks are weak and which are doing better. Goldman and JPMorgan have already returned their TARP funds and are free to return to business as usual. Goldman has increased risk to pre-crisis levels according to Value at Risk (VaR) measurements and are due to give out record bonuses. Meanwhile, JPMorgan Chase saw its loan loss reserves fall 2% from Q1 to Q2.
Citi is up tomorrow. Expect a huge contrast to what we have seen from Goldman and JPMorgan Chase.
Also expect some serious regulatory steps as well. As I indicated in April’s post “Stress tests reveal Citi and BofA need more capital, but you knew that already,” some banks were going to pass the stress test while others would fail. I also said then that debt for equity swaps, nationalization or FDIC seizure were going to be on the table, if the failing banks didn’t get the necessary capital from the private market. Citi and BofA have both failed the stress tests and have not gotten enough capital. So the Feds are going to move in and take action- and we’ll get a sense of what kind of action tomorrow.
The only remaining question is Wells Fargo. They have not paid back their TARP money but I still suspect they are doing better than Citi and BofA.