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Chase Activity Holds Up

Chase Activity Holds Up$49.8 billion Q4 originations

January 16, 2008


JPMorgan Chase & Co. reported solid quarterly mortgage production and record annual earnings and said it expects to increase its mortgage market share. But it still has significant exposure to Alt-A holdings and delinquency is on the rise.

Residential mortgage volume, including home-equity activity, was $49.8 billion during the fourth quarter, the New York-based company reported today. In the third quarter, total fundings were $50.4 billion, while volume was $42.7 billion a year earlier.

For all of 2007, JPMorgan said mortgage volume was $207.7 billion, compared to $171.1 billion for all of 2006.

Fourth quarter residential originations were $40.0 billion, climbing from $39.2 billion during the third quarter and $29.8 billion a year earlier, the report said. Home-equity business fell to $9.8 billion from $11.2 billion in the third quarter and $12.9 billion in the fourth quarter 2006.

Residential production was mostly evenly distributed, with retail, wholesale, correspondent and “CNT” each accounting for roughly one-quarter of the latest period’s business, according to the data.

In an investor presentation supplement, the company said it expects to continue gaining market share in mortgage lending this year.

JPMorgan said it owned $110.5 billion in HELs and mortgages as of Dec. 31. Its servicing portfolio ended the period at $614.7 billion.

At 3.03 percent at the end of last year, delinquency on all types of retail loans was higher than 2.39 percent on Sept. 30, 2007, and 2.02 percent on Dec. 31, 2006. The net charge-off rate on HELs ended 2007 at 1.05 percent, up from 0.65 percent the prior quarter and 0.24 percent a year earlier. Net charge-offs on mortgage loans were 2.06 percent, rising from the third quarter’s 1.60 percent and 0.20 percent a year prior.

Mortgage banking net income was $332 million during the latest period, compared to a $48 million loss in the third quarter and a $34 million profit during the fourth quarter 2006. Despite a $1.3 billion markdown on subprime positions, overall earnings were still $3.0 billion and full-year earnings were a record $15.4 billion.

“Our lower quarterly results were affected by the Investment Bank’s markdowns in subprime-related positions and weaker trading,” JPMorgan Chairman and Chief Executive Officer Jamie Dimon said in the report. “In addition, our consumer home equity and subprime loan portfolios performed worse than we expected.”

The company said its total subprime and subprime collateralized debt obligation exposure was $2.7 billion as of Dec. 31. Alt-A exposure totaled $6.4 billion at the end of the period, though the company’s exit from wholesale Alt-A lending today is likely to push this figure down.

JPMorgan’s results sharply contrast those of Citigroup Inc., which yesterday said it lost $9.83 billion on $18.1 billion in subprime mortgage write-downs and $4.1 billion in consumer loan losses.

The financial services giant said it employed 180,667 people at the end of 2007, about 6,300 more employees than a year earlier. Retail financial services headcount ended the year at 69,465.

JPMorgan Chase profile

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