JP Morgan Chase (NYSE:JPM) reported a solidly profitable quarter as the bank continues to benefit from the improving trends in many of its business lines. The bank also used the spotlight to highlight several shareholder friendly actions that were announced last month, including a dividend increase and a larger stock repurchase program.

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Muted Response
Some of the typical investor enthusiasm over an upside earnings surprise was muted because JP Morgan reduced some of its reserves that been previously set aside to cover losses. Although this does artificially boost earnings, it is also an indication that credit trends are getting better.

Q1 2011 Results
JP Morgan Chase reported net income of $5.55 billion or $1.28 per share in the first quarter of 2011. This was far above the consensus estimate of $1.16 per share, and represented solid growth over the same period in 2010.

Retail Business
One area that panicked some investors came in the retail financial services segment, where JP Morgan Chase reported a $208 million loss. The bank said that mortgage originations declined 29% on a sequential basis from last quarter. Investors are anxious for JP Morgan and other banks to get loan growth going again, so this did not make them happy.

JP Morgan was one of 14 banks that entered into a settlement with the government related to its handling of foreclosures. The bank agreed to review all loans that entered foreclosure in 2009 and 2010. The management of JP Morgan said during its conference call that complying with this review would require adding 2,000 employees to help in the review.

JP Morgan Chase also discussed the recent increase in its quarterly dividend, which moved up from $0.20 to $0.25. This gives the stock a yield of 2.22%, among the highest in the banking sector. PNC Financial Services Group (NYSE:PNC) also has a similar yield, after the bank announced a 250% dividend increase to $0.35 per quarter.

Last month, JP Morgan Chase also authorized a new stock repurchase program for $15 billion, and has been approved to spend up to $8 billion of that in 2011.

In March 2011, Bank of America (NYSE:BAC) announced a planned dividend increase to go into effect later this year, but was turned down by the Federal Reserve. Citigroup (NYSE:C) recently initiated a quarterly dividend.

Capital Levels
JP Morgan Chase saw a continued improvement in capital ratios in the first quarter of 2011, with the bank's Tier 1 common capital ratio improving to 10% compared to 9.1% in the first quarter of 2010. Other capital ratios moved up as well. (Learn how to determine if your assets are safe or if your bank has spread itself too thin. Check out Assessing Bank Assets: Are Your Savings Safe?)

Bottom Line
JP Morgan Chase reported a profitable quarter but disappointed some investors that were expecting stronger performance in loan growth and other areas. These issues will probably be with the bank for the rest of 2011.

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