JP Morgan reports 47% profit jump

JP Morgan did not make a loss even during the depths of the financial crisis

JP Morgan Chase is expected to report a record annual profit of about $16.7bn (£10.5bn) when it kicks off the US banking season later.

Much speculation is turning to whether Wall Street banks will increase their dividends.

JP Morgan chief executive Jamie Dimon has already said that he would like to raise its payments to shareholders.

Analysts are also keen to see what JP Morgan says about the US economy and how much it has been lending.

“I think JP Morgan are going to report a really strong number but the market is going to look for revenue growth to really drive the stock higher,” said David Konrad from Keefe, Bruyette & Woods.

“We think revenues will be down probably 2% this quarter, but this will be the trough quarter, and we expect growth thereafter for JP Morgan.”

JP Morgan is the only major Wall Street firm to have made profits in every quarter, even in the recession.

However, like other banks, it slashed its dividend from $1.52 a share before the financial crisis to 20 cents per share now.

But it has built up a lot of “excess capital”, according to Mr Dimon.

The bank put aside money to cover losses from the bad loans that fuelled the financial crisis, says the BBC’s Caroline Hepker in New York.

However the losses have not been as large as the contingency fund allowed for, so the money is being freed up.

But while the majority of concern in the UK about bank profits relates to the bonuses they pay their staff, this was not the case in the US, said Bill Cohan, a Wall Street banker of 17 years and a former managing director at JP Morgan.

“[Barclays chief executive] Bob Diamond is asking people in the UK to lay off the bankers. I think that in this country people have already decided to move on,” he told the BBC.

“For some reason the UK is quite ahead of the curve on this issue and the US seems to have retreated back into a comatose state on the issue of bankers’ pay and compensation.”

Mr Cohan also questioned who the banks really benefited.

“They’re public companies. They should be in business to make money for their shareholders. But my experience on Wall Street is that these firms exist more for the benefit of their employees than their shareholders,” he said.

“What other business on the face of the earth pays out between 40 and 50 cents on every dollar of revenue to employees in the form of compensation?”

This article is from the BBC News website. © British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.