J.P. Morgan debt insurance eases on profit
SAN FRANCISCO (MarketWatch) -- The cost of insuring debt for J.P. Morgan Chase & Co. fell on Friday after the bank said it still earned money in the second quarter, even after accounting for a sizable investment loss.
The spread on credit-default swaps, or CDS, for J.P. Morgan (JPM) narrowed to 125 basis points from 129 bps on Thursday, according to data from Markit.
A CDS spread of 125 means it would cost $125,000 annually to insure $10 million of J.P. Morgan's debt against default for five years.
Earlier Friday, the bank reported a quarterly profit of $5 billion, despite a $4.4 billion loss on synthetic credit derivatives. The loss was offset by accounting gains from adjustments in its debt valuation, an increase in the value of some securities holdings and a reduction in loan-loss reserves, J.P. Morgan said. Read the latest coverage on J.P. Morgan.
The decent quarterly results sparked a rally in financial stocks, with J.P. Morgan shares surging 6.3%.
The largest U.S. bank by assets will also restate first-quarter earnings because of "a material weakness" in internal controls over financial reporting.
The CDS spread for
The San Francisco-based bank said its second-quarter profit increased to $4.62 billion, or 82 cents a share, from $3.95 billion or 70 cents a share in the year-ago period. Revenue rose to 21.29 billion from $20.39 billion. See MarketWatch's coverage of Wells Fargo's earnings.
Debt insurance for most major U.S. banks were cheaper with CDS spreads for
Financial stocks were best performers in the S&P 500 Index (SPX) on Friday with shares of Wells Fargo jumping 3.2% and Citigroup gaining over 4%, while Morgan Stanley and Goldman Sachs shares added more than 3%. Read more about the sector.