This is Jamie’s land, this is your land
It’s a tale of two economies — one for the titans of U.S. banking and one for the rest of us.
Yes, JPMorgan Chase’s third-quarter results were impressive and a testament to the strength of its still solid investment bank. Much of the credit, however, falls to JPMorgan’s bond trading desk, which accounted for nearly 20 percent of the bank’s $28 billion in net revenues.
And expect much the same on Thursday, if not even more impressive results, from that other Wall Street colossus — Goldman Sachs.
But draw back the curtain and you’ll see that without its resurgent investment bank, Jamie Dimon’s banking empire looks rather ordinary.
JPMorgan’s credit card division lost $700 million, even as the bank overall posted a net profit of $3.59 billion. Retail financial services eked out a mere $7 million in net income. There’s no evidence that JPMorgan, despite its surprising earning prowess, is stepping up its commercial lending-especially to mid-sized businesses. The commercial bank’s portfolio of loans has held fairly steady over the past year.
That’s no doubt an indication of lax demand from companies still trying to navigate the Great Recession. But it is also an indication of the still-tight credit markets for many companies.
Of course, if companies can’t borrow money, it’s difficult for them to grow and create jobs. You know, the kind of jobs that help middle-class families put food on the table — not the kind of Wall Street jobs that generate fat year-end bonuses from pushing blips of light around a trading terminal.
The real economy, meanwhile, continues to weigh on the bank. In the quarter, JPMorgan set aside $2 billion to cover losses on troubled consumer loans, raising the total money the bank put aside for all bad loans to $31.5 billion. That’s a lot of loans the banks expects to go sour.
Still, JPMorgan can afford to be aggressive when it comes to setting up reserves for bad loans because of its scale and dominance. Many other banks simply can’t replicate that feat and also churn out a handsome profit. So expect banks smaller than JPMorgan to report far more mediocre third-quarter numbers.
That’s what living in a land of two economies has come to mean.