JPMorgan beats earnings estimates as trading boom eases trade decline

Exterior view of the headquarters of JP Morgan Chase & Co. in New York City on May 20, 2015. REUTERS / Mike Segar

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Jan. 14 (Reuters) – JPMorgan Chase & Co (JPM.N) on Friday reported a 14% drop in fourth-quarter profits due to a slowdown in its trading arm, but the exceptional performance of its banking unit d investment helped the lender to exceed analyst estimates.

The nation’s largest bank, whose fortunes are often taken as a barometer of the health of the U.S. economy, saw its trading income – a major profit driver in 2020 – drop 13%, while revenues in the investment banking jumped 28% on a record year for deals.

Loan growth, the bank’s core business, also increased by 6% amid an economic recovery, while net interest income on loans and investments in Treasury securities increased by 3%.

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JPMorgan shares, up 6% this year, slipped 3% in trading ahead of the opening bell on Friday, with investors worried about rising spending. In the quarter, non-interest expense jumped 11% to nearly $ 18 billion, mainly on higher employee compensation.

Over the past year, major US lenders have benefited from increased consumer spending and increased transactions driven by accommodative monetary policy, while their business lines have benefited from exceptional volatility in financial markets.

However, soaring inflation, a potential Omicron-induced economic slowdown and the return of trading revenues to normal levels are expected to challenge banking sector growth in the coming months.

“The economy continues to perform well despite the headwinds associated with the Omicron variant, inflation and supply chain bottlenecks,” said JPMorgan CEO Jamie Dimon.

“We remain optimistic about US economic growth as the business climate is optimistic and consumers benefit from the growth in jobs and wages.”

The fourth quarter trade deficit was offset by another strong performance from its investment bank, as global M&A activity broke all-time records in 2021 and pushed investment banking fees to their highest. high level in the first half of the year.

Much of the boom has been fueled by large financial sponsors and high-liquidity companies that have embarked on a trading frenzy following record hikes in their shares.

During the quarter, JPMorgan maintained its position as the world’s second-largest provider of mergers and acquisitions advice after Goldman Sachs, according to Refinitiv. The league tables rank financial services companies based on the amount of merger and acquisition costs they generate.


Overall, the lender made profit of $ 10.4 billion, or $ 3.33 per share, in the quarter ended Dec. 31. Analysts had estimated earnings of $ 3.01 per share, according to data from Refinitiv.

Revenue was almost flat at $ 30.3 billion. The bank’s profits were also bolstered by $ 1.8 billion in reserve releases.

For the year as a whole, it posted record profits and revenues, largely aided by reserve withdrawals.

During the quarter, JPMorgan withdrew more funds than it had set aside during the height of the pandemic in anticipation of an expected wave of defaults.

But that did not happen, thanks to consumer-friendly monetary policy and government stimulus measures that boosted consumer spending, allowing banks to free billions from their loan loss reserve.

Fixed income trading income fell 16% to $ 3.3 billion, while stock market income fell 2% to $ 2 billion.

Its personal and commercial banking unit saw revenue growth of 7%, driven by higher asset management fees and an increase in the number of customer transactions. Like other major lenders, JPMorgan should benefit from upcoming interest rate hikes in the coming quarters.

Citigroup (CN) will release its results later Friday. Wells Fargo & Co on Friday reported an 86% increase in fourth quarter profit, supported by gains from the sale of its corporate trust and asset management businesses. Read more

Goldman Sachs (GS.N), Wall Street’s top investment bank, will report its results on Tuesday, while Morgan Stanley and Bank of America close the earnings season on Wednesday.

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Reporting by Anirban Sen in Bengaluru and Matt Scuffham in New York; Editing by Saumyadeb Chakrabarty

Our standards: Thomson Reuters Trust Principles.

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