JP Morgan CEO Jamie Dimon listens to his presentation at the Boston College Chief Executives Club luncheon in Boston, Massachusetts, U.S., November 23, 2021.
Brian Snyder | Reuters
JPMorgan Chase on Friday reported earnings that beat analysts’ expectations on better-than-expected credit losses and a return to loan growth in parts of corporate activity.
Here are the numbers:
- Earnings: $3.33 per share, versus an estimate of $3.01, according to Refinitiv.
- Revenue: $30.35 billion, versus an estimate of $29.9 billion.
The bank’s shares fell 4.2% in premarket trading. JPMorgan said it made a net profit of $1.8 billion from the release of loan loss reserves that never materialized; without this increase of 47 cents per share, earnings would have been $2.86 per share.
After setting aside billions of dollars for loan losses early in the pandemic, JPMorgan has profited by steadily releasing funds as borrowers have held up better than expected. But CEO Jamie Dimon said he doesn’t see the accounting benefit as a critical part of the company’s bottom line. Even including the boost, JPMorgan posted the smallest profit beat in the past seven quarters.
“The economy continues to do well despite headwinds from the Omicron variant, inflation and supply chain bottlenecks,” Dimon said in the statement. “Credit continues to be healthy with exceptionally low net charges, and we remain bullish on U.S. economic growth.”
While the company’s revenue rose a modest 1% in the quarter to $30.35 billion as slower market revenue was offset by strong investment banking fees, other expenses that interest rose 11% to $17.9 billion due to higher compensation costs, the bank said. That was more than the $17.63 billion estimate from analysts polled by FactSet.
JPMorgan executives have previously spoken of the need to invest in technology and compensate employees after a booming year on Wall Street; Still, analysts can question management on the trajectory of spending this year.
“JPMorgan’s results were surprisingly weak and were hampered by unusually poor expense management,” Octavio Marenzi, CEO of consulting firm Opimas LLC, said in an emailed statement.
Government stimulus programs during the pandemic have left consumers and businesses off guard, leading to stagnant loan growth and prompting Dimon to say last year that loan growth was “challenged”. But analysts pointed to a rebound in the fourth quarter, driven by demand from businesses and credit card borrowers.
JPMorgan chief operating officer Daniel Pinto told a conference last month that fourth-quarter trading revenue was heading for a 10% decrease, driven by a decline in bond activity from record levels.
Trading revenue, however, slowed more than expected, falling 13% to $6.3 billion in the quarter, the bank said. This is largely due to a slowdown in bond trading desks. Investment banking contributed to a 37% increase in investment banking fees.
The bank was forced to pay $200 million in fines last month to settle charges that its Wall Street division allowed workers to use messaging apps to circumvent record-keeping laws.
Analysts may also question the bank on the impact of its recent decision to limit overdraft fees. JPMorgan said last month it would give customers a grace period to avoid punitive fees, a move that, along with other changes, will have a “significant” impact on revenue.
Shares of JPMorgan soared 6.2% this year before Friday, trailing the 11.6% rise in the KBW banking index.
This story is developing. Please check for updates.