JPMorgan sees Profits from Investment Banks as Defaults Rise

For the first time since 2007, JP Morgan Chase & Company has seen profits rise from investment-banking fees. The second-quarter earnings of JPMorgan increased to $2.7 billion or approximately 28 cents per share – an increase over the $2 billion a year earned before.

This increase in revenue from investment-banking has been a tremendous help considering the startlingly high amount of defaults occurring in consumer loans such as mortgages or credit cards. It is estimated at this time by Chief Executive Officer Jamie Dimon that the credit card business won’t see a profit between this year or 2010, and loss projections have increased for prime and subprime mortgages.

Investment banking has made $1.47 billion in profit which is 4 times the amount of profit earned in last year’s second-quarter. This profit comes from fees in underwriting stocks and bond deals, and fixed-income trading.

“The credit problems, although they have stabilized, we’re still not out of the woods,” said Gerard Cassidy, banking analyst at RBC Capital Markets. “For JPMorgan Chase, the challenge going forward is going to continue to be deterioration of credit.”

Despite this rise in profits, Chief Executive Officer Jamie Dimon predicted even more losses to occur from consumer loans. JPMorgan has already said that its losses in the credit-card department should be around 10 percent next quarter, dependent upon unemployment rates nation-wide. It’s newly acquired Washington Mutual and the cards issues by it may reach 24 percent loss by the end of the year.

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