JP Morgan Chase (JPM) has announced $3.3 billion in earnings for the first quarter of 2010. This amounted to $0.75 a share, handily beating the consensus estimate of $0.64 a share. In the conference call (see transcript here), CEO Jamie Dimon made uncharacteristically optimistic forward looking statements.
Looking closer, nearly half of the gain is from accounting changes, resulting in a reduction of provisions for future loan losses ($8.6 billion reduced to $7.0 billion), and a reduction in provisions for future credit card losses. JPM reported strong gains in investment banking and trading, which more than offset the $1.6 billion in real estate and credit card losses.
The Associated Press has a good summary article on the JPM quarterly report.
On the other side of the ledger, Daniel Thomas, at FT.com, reports that investors of Morgan Stanley’s (MS) real estate fund have been advised to expect losses of up to 61%:
Morgan Stanley has warned investors that an $8.8bn property fund could face the worst losses in real estate private equity history owing to the fall in value of investments made at the peak of the market.
Msref (Morgan Stanley Real Estate Fund) VI International could lose as much as $5.4bn, having been forced to take writedowns or hand back the keys on a range of investments round the world.
As opposed to the JPM earnings, the losses in the real estate fund are apparently entirely born by the investors that put $8.8 billion into the fund. I do not know what the fees charged by MS were, but they probably amounted to several hundred million dollars. Presumably there is no provision for any of these to be returned, so the big write-off falls entirely on the investors.
Ever trying to be of service to the investment community (and generate more fees), MS now has another real estate investment fund. According to Thomas, Morgan Stanley has raised a new fund, Msref VII Global, which is in the process of making new investments in the UK and US markets. Presumably investors in the new fund hope to capture profits from a rebound in real estate. MS has a good business model: make money on the way down, make money on the way up and risk none of your own money.
Disclosure: No positions
Similar Posts:
- Putting The Real Estate Crash In Perspective
- Another Close Look at Capital Appreciation in Real Estate Investment
- U.S. Debt on Review: What It Means For You
- How People Make Money by Investing in Houses
- Year End Tax Strategies
