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April 16th, 2009

JP Morgan Says It Could Pay TARP Back Tomorrow



Despite seeing their net income drop by 10% in the first quarter, JP Morgan Chase’s earning beat out analysts’ expectations. Share of the nation’s largest bank (by total assets at the end of ‘08) were valued at $0.40 a share, besting estimates of $0.32.

Yet, the bank remains dedicated to padding their capital reserves, explaining that the high cost of credit continues to make business difficult in the current economic environment:

Chairman and Chief Executive Jamie Dimon said Thursday that J.P. Morgan saw extremely high credit costs, especially in its card-services and retail financial services divisions. He added, “It is reasonable to expect additional increases to credit reserves if the economic environment worsens,” but that the company was confident that even a worsening economy wouldn’t compromise its stability.

Yesterday rival Goldman Sachs announced that they were stable enough to pay back half of their TARP debt. While JP Morgan has yet to pay back any of their Federal debt, the bank reiterates their current stability could allow them to pay it back “tomorrow” if they wanted — yet they’re awaiting instruction from the Treasury on how and when to pay it back.

April is an important month for the nation’s largest institutions who are working hard to get out from under the government’s influential shadow. If the Treasury decides to release the results of their stress tests, which combined with the first-quarter earnings reports, could prove to be two invaluable indicators for banks working hard to regain their operational independence. Whether the Treasury Department or the banks themselves decide to release the results, the findings could create an even greater bias among certain institutions in the industry.

Washington continues to criticize banks for their lack of lending, despite receiving TRAP funds to do so. Will credit availability shrink even more as soon as the healthy institutions pay back their TARP funds? Will these banks worry more about expanding their capital reserves or re-establishing consumer credit lines?

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