JP Morgan boss says US housing market has turned the corner
Continue reading the main story Jamie Dimon, chief executive of JP Morgan Chase, has said the US housing market "has turned the corner".He said that his bank, which is the biggest in the US by assets, would be reducing the amount it sets aside to cover losses from mortgages.
Net profit came in at $5.7bn (£3.5bn), up 33% from $4.3bn in the same period last year.
Meanwhile, Wells Fargo, the biggest US mortgage lender, reported a record quarterly profit.
JP Morgan set aside $1.8bn to cover potential loan losses, down from $2.4bn a year ago, it said in its results for the three months to the end of September. "Importantly, we believe the housing market has turned the corner," Mr Dimon said in a statement. The collapse of the US housing market sparked the banking crisis in 2008 that led to the global economic downturn. While the bank thinks the bottom of the housing market has been reached, Mr Dimon warned: "We also expect to see high default-related expense for a while longer."
Mortgage production-related revenue - excluding repurchase losses - was up 36% to a record $1.8bn.
One of the downsides to the results was a steep rise in demand from state-backed US mortgage guarantee giants Fannie Mae and Freddie Mac to repurchase mortgages that JP Morgan had sold them, according to Glenn Schorr, an analyst at Nomura Securities. "All in, we think it's a good quarter for JP Morgan, and other banks should see some of the same benefits," he said. 'Stupid error'
JP Morgan said it had made "a modest loss" in the quarter from what is left of the portfolio that has lost it an estimated $5.8bn this year. It said it expected to lose another $300m by the end of the year.
The shares fell sharply when the bank announced the trading losses in May, but have now almost completely recovered. Earlier in the week, Mr Dimon told an audience in Washington that he should have stopped the trades by the so-called London Whale. "We made a stupid error," he said. "I should have caught it... I didn't."
The bank has so far declined to comment on a report in Thursday's New York Times, which said that federal authorities were using taped telephone conversations, notes from staff meetings, instant messages and emails to build criminal cases against four people who worked for the London team.
Rival's results Wells Fargo said that its net profit was $4.9bn, up 27% from 2011. Revenue was up 8% to $21.2bn in the quarter from the same period last year. "By focusing on earning all of our customers' business and providing outstanding service, we continued to generate growth across our diversified set of businesses," said chairman and chief executive John Stumpf. "In the third quarter, core loans grew by $11.9 billion and we saw continued strength in our mortgage and deposit businesses."
The US government this week filed a lawsuit against Wells Fargo for mortgage fraud, alleging that the bank lied about the quality of mortgages it handled leading to huge losses for the government when the loans went bad. It is seeking damages for hundreds of millions of dollars in insurance claims already paid to Wells Fargo by the Federal Housing Administration.
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