JPMorgan Chase & Co. (NYSE: JPM) Earnings Disappoint Investors

JPMorgan Chase & Co. (NYSE: JPM) posted strong earnings on Thursday as a result of improving credit conditions, but the reaction from the market didn’t reflect the positing earnings announcement.

The bank posted second-quarter earnings of $4.8 billion, or $1.09 per share, easily surpassing consensus expectations from analysts. The company attributed the earnings citing significantly lower provisions for credit losses. JPMorgan Chase & Co. (NYSE: JPM) said that the quarter’s provision for credit losses represented a $325 million benefit, compared with an expense of $871 million during the same period last year.

JPMorgan Chase & Co. (NYSE: JPM) CEO Jamie Dimon said that the earnings include a benefit from a $1.5 billion reduction in loan loss reserves, which the company does not believe represents normal, ongoing earnings. Excluding that benefit, the company’s earnings only reached $3.3 billion, but after a tax of $550 million from the U.K., the company’s 87 cents per share figure still surpassed the consensus estimate of 67 cents..

Although the company posted solid earnings, many saw the reduction of loan loss reserves as more of a neutral item, since it didn’t represent actual growth. Sales, a more accurate indicator of growth dropped to $25.6 billion from $27.7 billion a year ago, but was generally in line with expectations.

Although the stock opened higher for the day at $40.72, the stock quickly retreated to $39.65, down 1.73% by 11:00 AM ET.

Dimon said in the bank’s press release that consumer lending net charge offs and delinquencies remained high, but had decreasted. He said that returns in JPMorgan’s consumer-lending business are “still unacceptable,” but that it’s too soon to forecast how and when the segments will improve.