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JPMorgan Has Three Perfect Trading Quarters in 2010

JPMorgan Has Three Perfect Trading Quarters in 2010
JPMorgan Chase & Co. headquarters in New York. Photographer: JB Reed/Bloomberg

JPMorgan Chase & Co. racked up a perfect trading record for the second half of last year, making money every day after accomplishing the same feat in the first three months of the year.

Traders at the New York-based bank made an average of $76 million a day last year, down from $84 million in 2009, according to an investor presentation today at the bank’s New York headquarters. The investment bank lost money on eight days last year, all in the second quarter.

“We don’t expect that to be repeated,” said Jes Staley, chief executive officer of the investment bank. “I imagine I’ll be up here next year and you’ll see a number higher than eight, but I think it underscores how well we’ve been managing our business.”

By comparison, JPMorgan had 42 days of losses in 2009, 97 in 2008, 46 in 2007, 33 in 2006 and 52 in 2005, according to the presentation. JPMorgan’s average daily trading revenue was $21 million in 2008, $39 million in 2007, $47 million in 2006 and $37 million in 2005, according to the data.

Banks have relied on trading profit to make up for weak earnings or losses tied to consumer banking. Charlotte, North Carolina-based Bank of America Corp., which hasn’t reported its fourth-quarter trading results yet, also posted perfect trading records in the first and third quarters. Traders at Goldman Sachs Group Inc. and Citigroup Inc. also made money every single day in the first quarter.

U.S. Role

The perfect trading results are rare and were primarily driven by the Federal Reserve’s programs buying mortgage bonds and U.S. Treasury securities. That’s driven trading volumes higher, boosted asset values and provided backup liquidity in the markets, analysts say.

“It gives traders a buyer of last resort and confidence that they have an outlet if some goes wrong,” said Paul Miller, a former examiner for the Federal Reserve Bank of Philadelphia and analyst at FBR Capital Markets in Arlington, Virginia. He said the strategy keeps bears on the sidelines in the fixed-income markets. The results are “driven by the Fed, not really any expertise of any trading desk.”

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