JP Morgan Spouts Earnings Beat Despite London Whale

The 'London Whale' swam away with roughly as much of JP Morgan's profit as the company expected in the second quarter. Trading losses from JP Morgan's credit strategy gone awry, run by its now out-of-work trader dubbed the London Whale, totaled $4.4 billion, in range with guidance of $3 billion to $5 billion. It could have been much worse: The New York Times had reported earlier this month that the loss could be as high as $9 billion, citing sources familiar with the matter. As a result, the bank's net income fell only 7% from the same quarter a year earlier. Earnings ex-times were $1.21 a share, far above analyst expectations of 76 cents. The loss dented earnings by about 69 cents a share after tax. The company also saw about a $1 billion, or 16 cents a share gain in its investment securities portfolio. The company's balance sheet was barely dented; it ended the quarter with estimated Tier 1 common capital under Basel III of 7.9%, roughly in line with the previous quarter. CEO Jamie Dimon said the company has workeed to reduce total synthetic risk in its Chief Investment Office, the group responsible for the trading loss. He said all remaining synthetic credit posistions to JP Morgan's investment bank. "Importantly, we have put most of this problem behind us and we can now focus our full energy on what we do best - serving our clients and communities around the world," Dimon said in a statement. The company also announced that it will no longer trade a synthetic credit portfolio. Largely as expected, net banking fees declined 35% in the quarter to $1.2 billion, with a 45% drop in undwriting fees an d a 41% drop in advisory fees. That's despite the company ranking first in global investment banking fees in Q2. Its fixed income and equity businesses reported revenue of $4.5 billion, down 15% from a year earlier.