JPMorgan Chase announced its card services
division accrued a net income of $1.3bn, up from a net loss of
$303m at the same point last year, in its Q1 2011 results.
The improved results are claimed to be driven
by a lower provision for credit losses and were partially offset by
lower net revenue.
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The division generated $4bn in net revenue – a
drop of $465m or 10% from Q1 2010. Net interest income was also
down by $489m or 13% in Q1 2011 to $3.2bn. The decrease in net
interest income is claimed to be driven by lower average loan
balances, the impact of legislative changes and a decreased level
of fees. Chase says the drop was also offset by lower reversals
associated with lower charge-offs.
Chase registered 2.6m new accounts in the in
first quarter of the year and excluding the Commercial Card
portfolio, the division’s sales volume was $77.5bn, an increase of
8.1bn or 12%.
Merchant processing volume was $125.7bn on
5.6bn total transactions processed during Q1 2011.
In the days preceding Chase’s results, US
Senator Richard J Durbin criticised Chase’s CEO and president Jamie
Dimon in a letter regarding Dimon’s high profile damning quotes
describing Durbin’s Amendment to the Card Accountability
Responsibility and Disclosure (CARD) Act.
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By GlobalData“In an annual letter to your shareholders…you
have been quoted describing my amendment as ‘counterproductive’,
‘price fixing at its worst’, and ‘downright idiotic’,” wrote Durbin
to Dimon.
“I am compelled to respond and I ask that you
share this response with your shareholders as well as your
customers.”
Durbin claims the payments industry is used to
“getting its way with many members of Congress and with your
regulators” and that the Federal Reserve’s draft regulations were
not written the way Dimon wanted it.
He says interchange reform will carefully but
firmly rein in the ‘fee collusion’ that JPMorgan Chase and
thousands of other banks currently engage in through Visa and
MasterCard.
“The wisdom of this reform is confirmed by the
irrationality of the arguments that your industry raises against it
– arguments that are based upon misrepresentations and threats
rather than evidence or logic,” says Durbin.
He blasts Chase’s “frankly inexcusable”
strategy in which it urged its US customers to ‘always select’
signature debit – a fraud prone technology while providing Canadian
customers with chip and PIN.
“There is no need for you to threaten your
customers with higher fees when you and your bank are already
making money hand-over-fist,” he says.
“And there is no need to make such threats in
response to reform that simply tries to spare consumers from
bearing the cost of interchange fees that are anticompetitive and
unreasonably high.”
