JPMorgan (JPM) Beats Earnings Despite

How does a company report $5.8 billion in trading losses and still see its stock rise 6% in one day? JPMorgan Chase (NYSE: JPM) is proving how after this morning’s eagerly awaited earnings announcement.

The largest U.S. bank by assets reported second-quarter earnings that beat low expectations in the wake of its infamous “London Whale” scandal. Analysts were looking for earnings of around 70 cents a share. JPM’s actual earnings were $1.20 per share.

Improved small-business loans and a steadily growing retail-banking unit contributed to JPMorgan’s earnings beat. They were enough to offset the $5.8 billion the company lost thanks to its so-called London Whale – the rogue, London-based derivatives trader who made some very bad investments last quarter.

Only $4.4 billion of the trading losses technically came in the second quarter. And some analysts were actually expecting the losses to be greater than $5.8 billion.

Those factors, coupled with the fact that many investors feel that the usually reliable bank has put all the bad trades behind it, have helped boost the stock 6% today. That’s the stock’s biggest one-day gain since May.

Of course, part of JPMorgan’s post-earnings gains can be considered a correction in the wake of the stock’s two-month free fall. Since the London Whale news came to light in late April, JPMorgan’s stock had lost almost a quarter of its value.

So today’s recovery appears to be part correction, part sigh of relief that the trading losses weren’t any worse than what many had feared.

Published by Wyatt Investment Research at