NEW YORK (Reuters) - JPMorgan Chase & Co <JPM.N> and Wells Fargo & Co <WFC.N> posted first-quarter results that soothed investors who had counted on the giant banks to handle the U.S. housing and credit crises better than many rivals.
By Jonathan Stempel and Joseph A. Giannone
NEW YORK (Reuters) - JPMorgan Chase & Co <JPM.N> and Wells Fargo & Co <WFC.N> posted first-quarter results that soothed investors who had counted on the giant banks to handle the U.S. housing and credit crises better than many rivals.
Profit slumped 50 percent at JPMorgan, the third-largest U.S. bank and fell 11 percent at Wells Fargo, the fifth- largest. Bad loans soared and executives at both banks said market woes will likely deepen.
Yet the banks have had less exposure, relative to their sizes, to the risky mortgages and complex securities that have caused more than $200 billion of write-downs and credit losses at lenders worldwide since last summer. Wachovia Corp <WB.N>, the fourth-largest U.S. bank, posted a surprise loss Monday.
!ADVERTISEMENT!Richard Moroney, chief investment officer at Horizon Investment Services LLC in Chicago, said JPMorgan's and Wells Fargo's write-downs and losses "were in line with what investors expected. There is relief."
In afternoon trading, JPMorgan shares were up 5.1 percent, and Wells Fargo shares were up 4.1 percent. Broader indexes also rose, with the Standard & Poor's 500 <.SPX> up 1.6 percent and the Philadelphia KBW Bank Index <.BKX> rising 2.6 percent.
JPMORGAN
JPMorgan said quarterly profit fell to $2.37 billion, or 68 cents per share, from $4.79 billion, or $1.34, a year earlier.
Results included a $955 million gain from a stake in credit card network Visa Inc <V.N>, which went public last month.
Profit topped the average analyst forecast of 64 cents per share according to Thomson First Call, which excluded Visa. Reuters Estimates said the average estimate was 71 cents, including Visa. Net revenue fell 11 percent to $16.89 billion, meeting expectations.
"JPMorgan did relatively well in a very difficult operating environment," said Jeff Harte, an analyst at Sandler O'Neill & Partners LP.
The New York-based bank set aside $4.42 billion for loan losses and took about $2.6 billion of write-downs tied to mortgages, loans to fund corporate buyouts and tight credit markets. Its total allowance for credit losses rose $2.52 billion from the end of 2007 to $12.6 billion.
"Overall, we feel pretty good about where we are," Chief Executive Jamie Dimon said on a conference call with analysts.
Dimon cautioned that financial markets face a long period of uncertainty and that these markets and an economy that may be in recession will weigh on results all year, if not longer.
Still, he expressed optimism for a recovery in credit markets.
"I do think we're well more than half way through -- maybe 75 to 80 percent through," he told reporters.
JPMorgan remains on track to complete its purchase of the troubled investment bank Bear Stearns Cos <BSC.N> this quarter. On Tuesday, JPMorgan said it boosted its stake in Bear to 49.8 percent, all but guaranteeing shareholder approval.
Dimon told reporters on a separate conference call that integrating Bear would not preclude JPMorgan from buying a retail bank.
"There's always opportunity in this business," he said.
WELLS FARGO
Wells Fargo said quarterly profit fell to $2 billion, or 60 cents per share, from $2.24 billion, or 66 cents, a year earlier. Revenue increased 12 percent to $10.56 billion.
Analysts on average had forecast profit of 57 cents per share on revenue of $10.4 billion, according to Reuters Estimates. Results included $485 million of Visa gains. Average loans grew 19 percent and core deposits increased 9 percent.
"Despite a weakening economy, the continued downturn in housing and expected higher charge-offs, this was a remarkably strong quarter," Chief Executive John Stumpf said.
San Francisco-based Wells Fargo set aside $2.03 billion for credit losses, nearly triple the year-earlier level, and net charge-offs more than doubled to $1.53 billion.
Despite the housing slump, mortgage applications totaled $132 billion, soaring 45 percent from the fourth quarter. Wells Fargo has a reputation as a conservative mortgage lender.
"That's exactly an area that plays to our strengths and we know we're picking up market share," Chief Financial Officer Howard Atkins said in an interview.
Atkins expects more housing market struggles, however. "We're closer to the bottom than we were six months ago, but we're not at the bottom yet."
Warren Buffett's Berkshire Hathaway Inc <BRKa.N><BRKb.N> is Wells Fargo's largest investor, Thomson ShareWatch said.
(Editing by Andre Grenon)
