JPMorgan Chase Q4 profit misses on bond trading slump

by Ike Obudulu Posted on January 16th, 2019

New York City, USA : JPMorgan Chase & Co. (JPM) reported a profit for the fourth-quarter that grew 67 percent from last year. It took a one-time charge, as a result of the U.S. tax reform in the prior year. Net revenue for the quarter rose 7 percent from the previous year. Revenue for the quarter missed analysts’ expectations.

In the pre-market trade, JPM is trading at $98.36, down $2.58 or 2.56 percent.

Net income for the fourth-quarter was $7.07 billion, an increase of 67% from $4.23 billion in the previous year. The prior year result included a $2.4 billion reduction to net income as a result of the enactment of the Tax Cuts & Jobs Act or “TCJA”.

Net income applicable to common stockholders for the quarter was $6.64 billion or $1.98 per share, compared to $3.77 billion or $1.07 per share last year.

Analysts polled by Thomson Reuters expected the company to report earnings of $2.21 per share for the fourth-quarter. Analysts’ estimates typically exclude special items.

The provision for credit losses was $1.5 billion, an increase of $240 million from the prior year. The increase was driven by higher net reserve builds in the current quarter in the Consumer and Wholesale portfolios.

Net revenue for the fourth-quarter was $26.11 billion, up 7 percent from $24.46 billion last year. On a managed basis, net revenue was $26.8 billion, up 4% from the prior year. Analysts expected revenues of $26.9 billion for the quarter.

Net interest income was $14.5 billion, up 9%, driven by the impact of higher rates as well as loan growth, partially offset by lower Markets net interest income. Non-interest revenue was $12.3 billion, down 1%, with no notable drivers on a Firmwide basis.

Non-interest expense was $15.7 billion, up 6%, predominantly driven by investments in the business, including technology, marketing, real estate and front office hires, as well as auto lease depreciation, partially offset by the absence of the prior-year FDIC surcharge.

Consumer & Business Banking net revenue was $6.6 billion, up 18%, predominantly driven by higher net interest income as a result of higher deposit margins and balance growth.

Banking revenue was $3.3 billion, up 6%. Investment Banking revenue was $1.7 billion, up 3%, with overall share gains, reflecting higher advisory fees predominantly offset by lower underwriting fees.

It was the first time JPMorgan Chase, the largest U.S. bank by assets, has underperformed earnings-per-share expectations in 16 quarters, according to Barclays equity analyst Jason Goldberg.

JPMorgan was the second large U.S. bank to point the finger at choppy markets in December for its bond revenue losses. Citigroup Inc (C.N)  posted a sharp drop in fixed income revenue, blaming widening credit spreads, or the premium investors demand for holding corporate bonds over safer U.S. Treasury securities.

Goldman Sachs (GS.N) and Morgan Stanley (MS.N), which report earnings later this week, are likely to say they experienced the same effects in their large fixed-income trading businesses.

Well Fargo & Co (WFC.N), which relies less on trading, said on Tuesday that fourth-quarter revenue missed expectations as revenue across all its banking units declined, especially at community banking.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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