JPMorgan, Schwab, Wells Fargo and Piper

JPMorgan Chase & Co., The Charles Schwab Corp. and Wells Fargo & Co. recorded third-quarter profit drops while Piper Jaffray Cos. swung to a quarterly loss as all four firms felt the effects of market turmoil. New York-based JPMorgan Chase reported a third-quarter profit of $527 million, or 11 cents a share, down 84% from the $3.4 billion, or 97 cents a share, recorded in the year-ago period. The third-quarter performance includes a $640 million after-tax loss, or 18 cents a share, related to its merger with Seattle-based Washington Mutual Inc. which it acquired on Sept. 25 (InvestmentNews, Sept. 25). Assets under management at the Wall Street giant were down 1% from the third quarter of 2007 at $1.2 trillion. Charles Schwab Corp., the San Francisco-based discount brokerage giant, said net income from continuing operations in the third quarter fell 6% to $304 million, from $323 million in a record quarter one year earlier. The profit, which translates to 26 cents a share, excludes a one-time pretax gain of $1.2 billion on the sale of its U.S. Trust unit in the third quarter of 2007. Schwab and other discount brokers benefited from unusually high trading volume — five of the firm’s 10 highest-volume days occurred in September — and the trend is continuing this month, according to analyst Richard Repetto of New York-based Sandler O’Neill & Partners. When market declines or a drop in volatility moves investors to the sidelines, he wrote in a note to clients on Tuesday, Schwab should do better than many competitors because commissions typically comprise just 18% of its total revenue. Wells Fargo of San Francisco reported a profit drop of 24% to $1.64 billion, or 49 cents per share, from $2.17 billion, or 64 cents per share, in the 2007 third quarter. The firm attributed the drop in large part to $646 million in impairment charges for investments in Washington-based Fannie Mae, McLean, Va.-based Freddie Mac and New York-based Lehman Brothers Holdings Inc. Minneapolis-based Piper Jaffray recorded a loss of $26.2 million during the third quarter, compared with earnings of $4.4 million, or 26 cents per share, in the year-ago period. The losses were attributed to the September turmoil in the financial markets, which led to drops in both fixed-income sales and trading revenue. On a positive note, advisory services revenue was up $21.4 million, or 33%, from the year-ago period due to higher average revenue per transaction.