JP Morgan Passes Stress Test

JP Morgan Chase (JPM) is reportedly in the clear, by not requiring any additional capital after enduring the government’s stress test, according to the Wall Street Journal, citing people familiar with the situation. The news doesn’t come as much of a surprise. Throughout the credit crisis, JP Morgan avoided reporting even one quarterly loss. In mid-April, the bank kept its perfect streak intact, reporting $2.14bn, or $.40/share, in net earnings for the first quarter. The total was off 10% from one year earlier, but better than most analysts had expected. The firm has benefited from an expanding deposit base, thanks to its acquisition of Washington Mutual last year, and a recent jump in mortgage refinancing activity. CEO Jamie Dimon has been clear about his desire to repay $25bn in government funds the bank has already received via the Troubled Asset Relief Program — even calling TARP funding a “scarlet letter.” With stress test results confirming JP Morgan does not need additional capital, Dimon is likely to press on with his plan to repay the funds as soon as possible. The government tests studied the potential performance of the 19 largest U.S. banks under projected economic expectations and a more adverse outlook with a longer, more severe recession. The point is to determine the capital buffer needed to ensure the firms remain appropriately capitalized at the end of 2010 if the economy proves weaker than expected. The government’s findings weren’t all rosy. Federal regulators found Monday Bank of America (BAC) is lacking capital on the order of $33.9bn, according to a bank executive who spoke with the New York Times, while Citigroup (C) is reported to need at least $10bn in fresh capital. Regions Financial Corp. (RF) is said to require additional capital, but the amount is not yet known. American Express (AXP) and Bank of New York Mellon (BK) are among those firms that won’t need to raise additional capital according to reports Wednesday by the Wall Street Journal. Write to Kelly Curran.