J.P. Morgan's new savior
For the first time since the American economy started to recover, it was Main Street rather than Wall Street that lifted the bank’s second quarter earnings, by 76% from a year earlier, to $4.8 billion. But revenue fell in four of the bank’s six lines of business.
The nation’s second largest bank by assets after Bank of America Corp. (BAC) topped analysts’ estimates and improved net income in every line of business except investment banking–helped by a 23% reduction in reserves for loans unlikely to be paid back.
Shares initially rose, but were down 0.5% to $40.15 in morning trading. The stock of Bank of America and Citigroup Inc. (C) also declined after being up premarket. The two banks are scheduled to report their results Friday.
Still, J. P. Morgan continues to shrink its assets as loans–including bad ones–roll faster off its balance sheet than it can make new ones. Small business loans grew at a healthy pace for the second consecutive quarter. The bank said it provided $700 billion in loans and new capital in the first half, though loan demand remains subdued.
Michael Cavanagh, who was Chief Financial Officer until he recently took over a line of business, told reporters during a conference call that at least the dialogue between the bank and its middle market borrowers has increased, but businesses’ use of their existing lines of credit remains…