Profit at JPMorgan Chase declines following a $2.9 billion charge from local bank rescues.
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JPMorgan Chase reported on Friday that its fourth-quarter profit fell following the payment of a $2.9 billion fee related to the government’s acquisition of failing regional banks in the previous year.
This is the difference between what the company said and what LSEG, formerly Refinitiv, polled analysts to expect:
- $3.04 in earnings per share; may not have compared to expectations $3.32
- Revenue: $39.94 billion as opposed to $39.78 billion anticipated
The largest U.S. bank by assets, JPMorgan CEO Jamie Dimon revealed that the company’s full-year 2023 earnings broke previous records in net interest income and credit quality. Just as it did in the 2008 financial crisis, JPMorgan emerged larger and more profitable from this year’s regional banking instability by acquiring First Republic, a midsized lender to rich coastal households.
Large banks were punished with a special penalty from the Federal Deposit Insurance Corporation to help replace losses from a fund that assisted uninsured depositors of regional banks that were seized.
The bank said that its earnings for the previous year dropped by 15% to $9.31 billion, or $3.04 per share. According to JPMorgan, earnings would have been $3.97 per share if not for the $743 million in investment losses and the regulatory costs associated with the regional banking crisis.
To $39.94 billion, revenue increased 12%, above experts’ projections.
In spite of his bank’s performance, Dimon expressed caution about the state of the US economy.
According to the statement, Dimon stated, “The U.S. economy continues to be resilient, with consumers still spending, and markets currently expect a soft landing.”
But he cautioned that supply chain modifications and deficit spending “may lead inflation to be stickier and rates to be higher than markets expect.” He went on to say that crises in the Middle East and Ukraine as well as actions taken by central banks to curtail support programs pose risks to markets and economies.
“These significant and somewhat unprecedented forces cause us to remain cautious,” he said.
Smaller competitors have seen their profitability pinched, while the largest U.S. bank by assets has handled the rate environment skillfully since the Federal Reserve started raising rates in early 2022.
Due to customers moving their money into higher-yielding products, the sector has been compelled to reimburse deposits, which has reduced margins. Bank-owned bonds saw a decline in value along with rising yields; these unrealized losses put pressure on capital levels.
Concern is also growing over increased credit card defaults and growing losses from commercial loans, particularly debt from office buildings.
Analysts will be interested in hearing Dimon’s thoughts on the economy and banks’ efforts to mitigate impending increases in capital requirements, in addition to his guidance on net interest income and loan losses for this year.
With investment banking revenue up from a year ago, Wall Street might be able to assist this quarter, even though trading may be “flattish,” as JPMorgan stated at a conference last month.
In November, battered bank stocks bounced back on hopes that the Fed had controlled inflation and may lower interest rates this year.
Last year, JPMorgan’s shares increased by 27%, surpassing the KBW Bank Index’s 5% fall and performing better than any of its rivals who are large banks.
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