J.P Morgan Hits The Jackpot, 5555 (NYSE: JPM) (NYSE: BAC)

NEW YORK - J.P. Morgan hit the jackpot on Wednesday as net income came in at 5555. Allan Edwards the CEO of The Markets Are Open said "it was nail biting as the slot machine turned, I was not sure if the last 5 would hit, it sort of paused for a second and then the last customer overdrafted on their account just as midnight struck on March 31. JPM hit the 5555 billion dollar payout." Unfortunately Wall Street changed the rules and analysts shouted, "You lose, everybody loses!" JPM has proceeded to lose $7.5 billion of market capitalization over the last two days.

The earnings were $1.28 share a share. First quarter results were impacted by: $2.0 billion pretax benefit from reduced credit card loan loss reserves,$1.1 billion pretax loss from mortgage servicing rights asset adjustment for increased costs, $650 million pretax expense for estimated costs of foreclosure-related matters.

Allan Edwards continued, "the company had provisions for credit losses of $1,169 in the quarter. In 2006 and 2005 before the credit bubble the company had $3,270 of provisions. JPM is also 55% larger now; given this we would expect this sort of company to have around $5.5 billion in provisions in any given year meaning that the provisions in the quarter were very close to what we would expect in a normalized year and therefore we can consider these earnings as being organic."

Edwards finished "I don't think most investors understand what a net credit release is, they seem to get concerned when banks do them, but they are more concerned when the banks have large provisions. A net credit release in itself means nothing (since some business segments have net credit releases and others have credit buildups) and it does not mean that a bank over/under provisioned like some analysts think. As long as provisions for the quarter are near what we would think would be normalized provisions then there is nothing to worry about. Though, these are currently non-normal times, when we get back to normal times, JPM will be earning in excess of $20 billion a year. Also I want to point out that people are focusing on the credit releases as being negative in some divisions and focusing on the credit buildup in the other divisions as also being negative. This is the bi-polar world of Wall Street where the same investors, will sell first ask questions later on certain days and buy first ask questions later on other days. "

Bank of America reports tomorrow, banks often sell-off on BAC's report and buyback after Wells Fargo and other strong banks such as PNC and USB report.