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How does a company report $5.8 billion in trading losses and still see its stock rise 6% in one day? JPMorgan Chase (NYSE: JPM) is proving how after this morning’s eagerly awaited earnings announcement.
The largest U.S. bank by assets reported second-quarter earnings that beat low expectations in the wake of its infamous “London Whale” scandal. Analysts were looking for earnings of around 70 cents a share. JPM’s actual earnings were $1.20 per share.
Improved small-business loans and a steadily growing retail-banking unit contributed to JPMorgan’s earnings beat. They were enough to offset the $5.8 billion the company lost thanks to its so-called London Whale – the rogue, London-based derivatives trader who made some very bad investments last quarter.
Only $4.4 billion of the trading losses technically came in the second quarter. And some analysts were actually expecting the losses to be greater than $5.8 billion.
Those factors, coupled with the fact that many investors feel that the usually reliable bank has put all the bad trades behind it, have helped boost the stock 6% today. That’s the stock’s biggest one-day gain since May.
Of course, part of JPMorgan’s post-earnings gains can be considered a correction in the wake of the stock’s two-month free fall. Since the London Whale news came to light in late April, JPMorgan’s stock had lost almost a quarter of its value.
So today’s recovery appears to be part correction, part sigh of relief that the trading losses weren’t any worse than what many had feared.