When the market celebrated the JPM 3Q09 results, I failed to understand the oblivion to the deteriorating credit market conditions which was clearly reflected in the JPM’s traditional banking operations. While the impact of high credit losses in the JPM’s traditional banking operation was moderated by JPM’s trading revenues from its investment banking operations, it will be unwise to write off the poor signals which were sent out about the real economy and banking sector.
On closely monitoring JPM’s traditional banking 3Q09 results, the manifestations of the deteriorating credit environment is seen in shrinking loan portfolio (contracting 14.2% y-o-y and 4.0% q-o-q), rising delinquencies and increasing NPA levels. The 30+ days delinquency rate for consumer lending spiraled to 5.85% against 5.22% in 2Q09 and 3.16% in 3Q08 while the 30+ days delinquency rate for credit card inched further to 5.99% in 3Q09 against 5.86% in 2Q09 and 3.91% in 3Q08. Non performing loans increased to 2.72% of the total loans from 2.17% in 2Q09 and 0.91% in 3Q08.
JPM’s gross charge off rate increased to 4.1% from 3.7% in 2Q09 and 1.4% in 3Q08 while the annualized provisioning for loan losses increased to 4.9% from 4.7% in 2Q09 and 3.0% in 3Q08.
When I see these numbers, my belief that the real issues of housing crisis and unemployment continue to haunt the economy, is further reaffirmed. More information about JPM’s 3Q09 results as well as forensic equity research is available http://boombustblog.com/Reggie-Middleton/1171-Reggie-Middletons-Opinion-on-JP-Morgans-Q309-results.html