JPM Hints that 'Buybacks' May Have Peaked

During its earnings call Wednesday, mega bank JPMorgan Chase hinted that the loan buyback plague may have peaked but the bank isn't quite ready to declare that its battles with Fannie Mae and Freddie Mac are over. In a question and answer period with Wall Street analysts, JPM chairman and CEO Jamie Dimon noted that the company has established a "litigation reserve" of $2.3 billion to cover residential buybacks, saying the company, at this time, has no reason to update the figure. He cautioned that it appears delinquencies are improving and there is solid improvement in conditions as measured by credit scores, and loan-to-value ratios. Dimon also said jumbo lending doubled at JPM during the quarter and he believes that the nonagency securitization market will revive. JPM, for now, is letting its home equity and subprime portfolios run off. The company predicted that home equity losses could reach $1.4 billion over the next several quarters. It projects $600 million in losses on prime mortgages, and $500 million on subprime. However, these loss projections exclude residential assets acquired from Washington Mutual, the troubled mega thrift it bought with federal assistance in the fall of 2008. WaMu's residential problems, alone, added $1.2 billion to JPM's credit costs in the first quarter of 2010. At the end of March, its loan loss reserves (company wide) totaled $38.2 billion, compared to $27.4 billion in the same period a year earlier.