JPMorgan Sells Debt at Record Low U.S. Borrowing Cost

Successful bond issue suggests investors have forgotten bank’s huge trading loss.

JPMorgan Chase & Co.’s $6.2 billion trading loss last year is little more than a fading memory for bondholders who awarded the lender its cheapest U.S. borrowing costs ever at a debt sale yesterday.

The largest U.S. bank by assets sold $6 billion of securities, including $2.75 billion of 10-year notes with an unprecedented 3.2 percent coupon, according to data compiled by Bloomberg. The extra yield investors demanded to hold those securities rather than government debt was 56 basis points tighter than where average comparable JPMorgan spreads traded before the scandal came to light in April.

‘Solid Position’

The bank earned $21.3 billion in net income last year on improving credit quality, according to Kathleen Shanley, a bond analyst at New York-based researcher Gimme Credit LLC. A provision for credit losses declined by more than half to $3.4 billion from $7.6 billion in 2011, Shanley wrote yesterday in a report. It’s the third straight year the lender has earned at least $15 billion in profit.

Bank Spreads

The lender set aside $656 million in provisions against future mortgage loan losses, compared with an average estimate by analysts of about $1.5 billion, according to a Jan. 16 earnings statement. Mortgage fees and related revenue increased to $2.03 billion in the fourth quarter from $723 million a year earlier as the unemployment rate fell to 7.8 percent, indicating a strengthening economy.

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