J.P. Morgan --- Carol Massar
>> shares of j.p. morgan climbed today after second-quarter earnings beat analysts’ expectations. j.p. morgan earned two cents ahead of the average analyst estimate. factoring in $2.3 billion to cover legal cost, j.p. morgan lost $548 million, or 27 cents a share. the chief financial officer discussed the firm’s legal costs with carol massar.
>> take years to resolve and we will learn more facts which could be better facts or worse facts relative to what we know today so there is no way i can give you assurance that that is absolutely all. it could be more. it could be less. that represents our attempt to scope it, to bound the financial risk associated with what’s out there.
>> jamie dimon didn’t want to give a forecast but tried to give some guidance to analysts. what are your biggest concerns as you look at the business? i know trading was tough in the last quarter. investment banking fees helped offset that. what are your concerns and worries?
>> what we are totally focused on as a management team just now is on executing the merger. i don’t see any underlying business trends just now that are reasons for concern.
>> even rising rates?
>> even rising rates. overall, the rising rates are associated with a stronger economy and there is no doubt in my mind that we have a better -- a better outlook for the firm as the economy improves. so are there businesses that do better and businesses that do less well as rates rise? absolutely. i highlighted the mortgage business, for example, will be weaker as rates rise. on the other hand, there are parts of the business that do better as rates rise, for example, we ought to be looking at the somewhat wider spreads on our deposits as rates rise.
>> what about the trading environment?
>> trading has been tough. it has gotten tough, generally in the environment, but, as well, the way we have positioned relative to this environment in the second quarter.% but the overall environment, it is not just comments that j.p. morgan is making.% i think if you look at all securities firms, we have all commented on the fact that april was a better month than may was a better month than june so we are walking into an environment just now that is a little bit more difficult. we are walking into the summer months in which you see reduced levels of activity in the markets . august historically an extremely low month. so what we want to do is be cautious on this very short-term outlook because the focus on the street is very much what’s in the next quarter and in that context, we want to convey a certain level of caution.
>> cost savings, you know you update to $3 billion, including the firing of 10,000 workers, is that correct?
>> we have updated our estimates for head count reduction to 12,000. net we are down about 2,000 as of june 30 so incrementally there is quite a bit more to go. we have increased the savings and the pace at which woo achieve those savings and those both are meaningful in an ongoing basis in assessing the company and the earnings of the company so savings are up, almost $1 billion, and the pace of execution, we now talk about the 2.2 billion, which was the older number, the 2.2 as being there by the end of 2005. we talked about that being a number we would achieve in 2007. so the pace is significantly better.
>> one last question, biggest challenges, convincing shareholders this is going to work.j.p. morgan stock is still down from the acquisition of chase back in 2001. a lot of these big mergers don’t work out. you know it well. what is it that you really need to do to provide shareholder value?
>> chase acquisition of j.p. morgan was at a point at which we had bursting the bubble. so we had the situation in which not just j.p. morgan but overall all the securities industry went through a major correction in the following years -- 2001, 2002, 2003. i don’t think there is any evidence to say that the execution of the merger, chase and morgan, was not well done. what we had is a situation in which we acquired a company at the peak of the market in terms of the overall economic cycle. that is not the situation we are noat this point with the merger with bank one.
>> she would not comment on reports that j.p. morgan is in talks to acquire the internet banking arm of britain’s prudential. democrats invade boston next week. voters’ paychecks will be a key topic of conversation there. we’ll look at where they stand in the “chart of the day” coming up.
