NEW YORK --
JPMorgan Chase & Co. reports third-quarter financial results on Wednesday. The following is a summary of key developments and analyst opinion related to the period:
OVERVIEW: JPMorgan Chase, considered one of the strongest U.S. banks in an industry battered by the economic downturn and credit crisis, is the first large bank to report its third-quarter results. Investors will likely be focusing on two key areas for the New York-based banking giant: investment banking and loan losses.
Most banks have been hammered by mounting loan losses across all types of consumer lending, from mortgages to credit cards. Any sign of moderation in loan losses or an outright decline in charge-off rates - the percentage of loans written off as not being repaid compared with the entire loan portfolio - would provide evidence that a recovery is under way in the financial sector. It would also justify the big run-up in banks' stock prices in recent months as the broader market rallied.
Investment banking revenue and profits, which accounted for a large chunk of JPMorgan's second-quarter profit, will also be a focus for investors. Revenue from JPMorgan's strong investment banking platform has helped offset weakness in its consumer banking operations, which are still struggling under the weight of loan losses.
Capital markets activity at JPMorgan, as well as at other firms such as Goldman Sachs Group Inc., received a lift in the second quarter from strong fixed income, commodities and currency trading. Third-quarter trading results are expected to decline from the robust pace in the second quarter because of a traditional slowdown during the summer months. Should that slowdown be more than expected, it could be a sign the financial markets still haven't fully recovered from their depths at the beginning of the year and late in 2008.
BY THE NUMBERS: Analysts polled by Thomson Reuters predict JPMorgan will earn 49 cents per share in the third quarter and generate revenue of $24.81 billion.
JPMorgan Chase earned $527 million, or 11 cents per share, during the third quarter last year. Its revenue totaled $14.74 billion.
ANALYST TAKE: Fox-Pitt Kelton analyst David Trone is forecasting a decline in operating income between the second and third quarters as the credit cards and commercial bank businesses will be a drag on earnings. Trone, however, is forecasting a modest improvement in the investment bank division compared with the second quarter.
Trone said he expects credit costs, overall, could be flat, as the increase in net charge-offs slows and JPMorgan reserves less for future loan losses.
Trone predicts JPMorgan will earn 60 cents per share in the third quarter.
Trone, as well as Credit Suisse analyst Moshe Orenbuch, are predicting JPMorgan to add $1.4 billion to its loan-loss reserves in the third quarter.
Orenbuch noted that every $100 million in loan-loss provisions reduces earnings per share by about 2 cents, so a smaller-than-expected provision could help bolster bottom-line profits at the bank.
Orenbuch estimates JPMorgan will earn 51 cents per share in the quarter.
WHAT'S AHEAD: Orenbuch says investment banking profits are likely to slow through the remainder of the year, which could reduce profits during the last three months of 2009. He cut his full-year earnings estimate to $1.70 per share from $1.75 per share.
STOCK PERFORMANCE: Shares of JPMorgan rose 28.5 percent during the third quarter. Both the Dow Jones industrial average and the broader Standard & Poor's 500 indexes gained 15 percent during the same period.
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