JP Morgan Quietly Climbs Subprime Ladder

When JP Morgan met with investors earlier this month, Chief Executive Jamie Dimon told attendees that "We don’t do much in the subprime business — at all.”

However, “we don’t do much” actually translates into a subprime mortgage portfolio that stood at $13.2 billion at the end of last year, or about 3.6 percent of the company’s $367 billion consumer loan portfolio, according to a Reuters article.

Many see JP Morgan as taking advantage of the void created by the subprime fiasco, positioning itself into one of the biggest originators of risky mortgages.

"Mr. O’Neal admitted that it’s hard to make money in mortgages now," Hintz said in a research note. "But he pointed out that 25 competitors have left the market or declared bankruptcy and (First Franklin) leaves Merrill Lynch with large origination capabilities that will prove its value as the market adjusts to new issuance standards and economics of the mortgage business."

While JP Morgan is mum about how much subprime lending contributes to its bottom line, in March, Charles Scharf, head of JPMorgan’s retail division, said home equity loans and subprime mortgages have the potential to contribute a total of $800 million in annual net income when working with the company’s investment bank.  JP Morgan packages pools of loans into securities and sells them to investors.