Further Bank Consolidations Ahead - JPMorgan CEO

http://ocnww.blogspot.com/Monday,May 4, 2009, Update July 18, 2009
Editorial comments by Benjamin Train

Excerpts from Original Reuters article
By Elinor Comlay. Editing by Gunna Dickson and Gerald E. McCormick


"There are still too many banks in the United States,"
said JPMorgan Chase CEO, Jamie Dimon to Calyon
Securities analyst Mike Mayo in a webcast call
on Monday, May 4th.

JPMorgan last year purchased Bear Stearns at
a fire-sale price and snapped up the assets of
failed Seattle thrift Washington Mutual Inc.
who is now suing JPMorgan Chase & Co.

In the Delaware federal bankruptcy court suit
Washington Mutual, Inc., filed last Monday against
JPMorgan Chase. Just in case it wasn't inflammatory
enough to accuse the bank of misappropriating $4 billion
that the bankrupt parent company of Washington Mutual
Bank had on deposit at WaMu when JPMorgan purchased
the savings bank for $1.9 billion.

On Friday, Quinn Emanuel filed a motion
claiming that JPMorgan engineered a deliberate scheme
to undermine WaMu so it could purchase WaMu's assets
on the cheap. Quinn Emanuel represents Washington Mutual,
Inc., WaMu's parent company.

The second-largest bank is busy absorbing
these acquisitions, Dimon said, but added that
regulators may still look to JPMorgan to
"do something" in terms of acquisitions.

Acquisitions of retail banks in emerging markets
remain JPMorgan Chase’s biggest “strategic issue”
but the US group is also open to buying smaller
lenders in its home market, Jamie Dimon said on Monday.

As the U.S. banking sector continues to further
consolidate, regulators may encourage JPMorgan
to take-over additional U.S. assets, including
stronger community banks.

JPMorgan is also looking to grow outside of the
United States by expanding existing businesses
in countries like Brazil, China, India and
Russia, he said.

Consumer businesses in the United States remain
under stress and the credit card business in
particular is suffering, according to Dimon,
who added that he expects these businesses to
shrink over the next two years.

Commercial Property Values Fall

Commercial property values fell 21.5
percent through February from their
October 2007 peak, according to Moody’s
Investors Service. Properties bought in
2006 are now worth on average 11 percent
less than their original price, and those
bought in 2007 are worth almost 20 percent
less, Moody’s said.

Commercial mortgage delinquencies in the
U.S. climbed to the highest level in at
least 11 years in April as scarce credit
made it difficult for landlords to refinance
loans, according to property research
firm Trepp LLC.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aES8UegfUvkU

"Unemployment and home prices (are) driving
losses way beyond what we expected, even
(with) unemployment like this," he said.

Discussing the broader economic outlook, however,
Dimon said the pace of decline has slowed.

"I don't know if I call it bottoming out,
but kind of a crawling along the bottom here,
maybe a little bit better," he said.

JPMorgan posted a better-than-expected
first-quarter profit in April, largely helped
by trading gains and a surge in underwriting
revenue at its investment banking unit, and
Dimon warned in a call with analysts last month
that those conditions were unlikely to continue
into the second quarter.

When Mayo asked him on Monday about April's
trading performance, he declined comment.

Bank regulators will be publishing their results
of the U.S. largest banks 19 banks this week.

The regulators' focus could spell trouble for
local regional banks and Credit Unions subject
to the test criteria. Their portfolios have
more individual loans and fewer of the big pools
of securitized loans that Wall Street giants
specialize in.

The methodology "certainly penalizes those banks
that are more involved in traditional banking,
which frankly have been performing better in recent
months," said Wayne Abernathy, a former Treasury
Department official now with the American Bankers
Association.

The government's "stress tests" of 19 large U.S.
banks also takes a harsher view of loans than of
other troubled assets including commercial real
estate portfolios, REITs and underwritten loans.

According to a Federal Reserve document obtained
by The Associated Press. That approach favors a
few Wall Street banks while potentially
threatening the smaller regional community banks
and Credit Unions.

The test assumes that the banks' individual loans
will lose up to 20 percent of their value. Many
analysts are expecting a much more significant
decline in commercial real estate portfolios over
the next six months, as retailers abandon shopping
malls in droves and file bankruptcy liquidations.

A Treasury Department spokesman referred all
questions regarding these issues to the the
Federal Reserve, a foreign Corporation. A spokesman
for the Federal Reserve would not comment.


To see the current posted list of failed banks, visit:
http://www.fdic.gov/bank/individual/failed/banklist.html