Banking Bonanza: JP Morgan Crushes Quarterly Earnings

The world may still be struggling with escalating Covid-19 infections, but it was a good quarter JP Morgan Chase. Fourth quarter earnings for the bank came in at $12.14 billion — $3.79 per share, soaring past estimates of $2.62. A year ago, JP Morgan reported profits of $8.52 billion or, $2.57 a share.

Revenue jumped to $29.22 billion for the quarter. A gain of 3% from last year and better than the expected $28.70 billion.

For the year, the bank reported revenue of $119.54 billion – 4% higher than 2019.

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Despite the record numbers, the bank did need to set aside $2.9 billion from its reserves pile for expected loan defaults in the quarter. This created a $1.9 billion boost after a $1 billion charge off.

Record Trading Revenue Fuels Quarter But “Near-Term Uncertainty” Expected

Though the bank recorded record revenue thanks, in part, to record trading revenue, the bank’s CEO Jamie Dimon remained cautious on the future. In a statement, the CEO said that the bank does remain positioned for “significant near-term economic uncertainty.”

There are growing concerns about the economy as we head into the coming winter months. Bankers worry that consumers will struggle amid rising unemployment and business closures. Though there are multiple vaccines now becoming available, coronavirus is still spending at a rampant rate. Shares of JP Morgan traded slightly lower on the day, off 1.79%.

Wells Fargo, Citigroup Disappoint

In addition to JP Morgan, Wells Fargo and Citigroup both reported earnings as well. Both these banks missed analyst expectations.

Wells Fargo’s revenue was down roughly 10% in the fourth quarter from a year earlier. Shares of Wells Fargo closed down nearly 8% at $32.04 a share.

At Citigroup, revenue dropped 10% to $16.5 billion. Profits in the fourth quarter declined 7% compared to a year earlier comping in at $4.63 billion or $2.08 a share.

Banks Cautious About Future

One of the biggest challenges now for the financial sector is anticipating how America’s economy will manage through the coming year. Having dealt with a credit crisis in 2008, the memories of faulty loans are still fresh. Nonetheless, perhaps due to some measures taken initially with the Cares Act, as well as additional efforts that will be soon taken through President Elect Biden’s American Rescue Plan, homeowners have not defaulted on their loans en-masse.

In part thanks to lessons learned in the 2008 aftermath, government insisted that consumers be granted a forbearance on their mortgages. As a result, we haven’t seen mass selling which increasingly led to a depreciation in home values in ’08. In addition, the banks are significantly better capitalized. As such, it’s clear that while earnings at some institutions may suffer, the entire housing industry is not on the verge of collapse.

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