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-- -- now JPMorgan enough earnings season for the bank's name is disappointing fact blowing past Wall Street expectations.
But investors should not as upbeat shares are down nearly 2% on the -- on me now for a closer look at the numbers.
Not for now Wells Fargo senior analyst Matt thinks I'm in studio today thanks very much -- subject at your flash -- right on the heels of the earnings release mortgage provides the fuel so we know mortgage loan originations were up 29% from the prior year 8% from the second quarter.
This little reason JPMorgan surpass most everyone's expectations.
Yes I think there there -- really three reasons why the why the earnings were a bit better than expected first of all you did have a very strong quarter for mortgage origination and that usually fuels mortgage.
Origination gains when they sell the mortgages.
Following -- second of all the investment bank.
Head out what -- had a very good quarter in investment banking fees they had a trading quarter that was also reasonably good particularly given the environment.
And third of all we believe that they had had a pretty good quarter in terms of reining in operating expenses.
Which help the bottom -- -- reactions are gonna get your take on that we know the quote from Jamie Dimon saying housing -- turned a corner there were substantial charge -- the bank -- expect to see high default related expenses for awhile.
Can you comment on and maybe if that's what investors are reacting to today well I think I I think you.
You brought up two separate issues.
One it was a charge that related to.
A requirement from the regulators related to.
Lawsuit bank loans where the customer of the bar workers already gone into bankruptcy the regulators have have told the banks.
JPMorgan included but certainly not the only bank.
That they need to take write downs on those loans as -- as a precautionary measure really.
I'm over time we think JPMorgan will be able to earn most of those losses back through the income statement.
Some people are saying I'm just gonna come to a third time I apologize and that.
That lower in the loan loss provisions is also what helps to make a meaningful boost in the quarter and that I also what people are a little bit skeptical about well that's certainly true -- released about a billion dollars of reserves 900 million in the mortgage portfolio alone.
That was about eleven to 12% of their pretax earnings most of the banks that we cover we estimate about a 20/20 5%.
Pre tax boost so it by that comparison JPMorgan looks a little bit higher quality.
Again not -- most of the other banks in our in our coverage universe so how does a soft figure into your outlook now since -- London -- trading loss debacles of the total profit for the quarter was five point 71 billion compared with a loss of at least five point eight billion thinks that's.
I believe the -- status where we are now with that so -- pushing to the rear view near even more.
We think it does the company came out and said that the losses related to the CIO portfolio were roughly.
Two to 300 million dollars obviously a much lower number than we saw on the first two quarters this year.
They also suggested that the losses could be in in that similar range in the fourth quarter in the company hopes to have it largely behind them.
By the start of the new year obviously there's still the board review that's ongoing and be -- end the request to -- purchase more capital.
More more shares.
That the is gonna have to pass the Muster of the outbreak regulators -- -- Alec on the shares from from an investor's perspective what's the strategy we we we have an outperform rating on the on the stock for really for three reasons one is we think the company will generate.
20% earnings growth of the next two years.
Secondly we think that they -- we we know that they generate currently higher returns on capital than their than their peer group roughly doubled their peer group.
And then in terms of valuations.
Even though they're generating more profitability there there there.
They share price multiples are really not that much better than a lot of -- appears that we think -- relative value basis.
It's a good it's it's a good place which money excellent -- -- now thanks so much time thank you.
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