- Adjusted earnings per share beat analysts' estimates
- Firmwide revenue rises 1%, non-interest expenses fall 7%
JPMorgan Chase & Co. said fourth-quarter profit rose 10 percent as expenses from litigation and employee compensation shrank. The biggest U.S. bank also said a regulatory burden would have a smaller impact on capital requirements than previously estimated.
Net income rose to $5.43 billion, or $1.32 a share, from $4.93 billion, or $1.19, a year earlier, according to a statement Thursday from New York-based JPMorgan. Earnings excluding litigation costs, accounting adjustments and a tax benefit were $1.34 a share, beating the $1.27 average estimate of 29 analysts surveyed by Bloomberg. The bank earned $24.4 billion for 2015, a second-straight annual record.
Wall Street firms are under pressure to cut costs as revenue from fixed-income trading slumps. JPMorgan Chief Financial Officer Marianne Lake said last month that the period had been quiet for bond and equity markets, adding that the Federal Reserve’s Dec. 16 interest-rate increase could provide a boost in 2016. The company had only $99 million in litigation costs after getting $318 million from the U.S. government tied to its acquisition of Washington Mutual Inc. assets. That compared with $990 million in legal expenses a year earlier.
“Expense discipline was impressive,” Richard Ramsden, a Goldman Sachs Group Inc. analyst, said in a note, adding that capital-markets results “were modestly better than expected.”
JPMorgan climbed 1.5 percent to close at $58.20 in New York, paring its decline this month to 12 percent.
Revenue rose 1 percent to $22.9 billion in the fourth quarter and non-interest expenses fell 7 percent to $14.3 billion. Revenue on a managed basis, which includes tax adjustments, was $23.7 billion, beating analysts’ estimates. The number of employees declined to 234,598, a drop of 3 percent.
JPMorgan said its surcharge for global systemically important banks -- a closely watched measure that will determine its required capital ratio -- fell to 3.5 percent after the company cut client deposits and reduced derivatives. The bank said about a year ago that it could be as high as 5 percent. The firm gave up an insignificant amount of revenue to whittle down the surcharge, Lake told reporters Thursday.
“These improvements dramatically improve its outlook to successfully pass a future” Federal Reserve stress test while maintaining or increasing its return of capital to shareholders, Eric Wasserstrom, an analyst at Guggenheim Securities LLC, said in a research note.
Earnings at the corporate and investment bank surged 80 percent to $1.75 billion, driven by the lower legal expenses. Revenue slipped 4 percent from a year earlier to $7.1 billion on declines in trading and investment banking. While fixed-income trading revenue dropped 3 percent to $2.57 billion on lower commodities and credit activity, the results exceeded estimates by Matthew Burnell of Wells Fargo & Co. and Susan Roth Katzke of Credit Suisse Group AG. Equity-trading revenue declined 7 percent to $1.06 billion.
“In the fourth quarter we talked about client activity being very light, risk was off, so our risk was low and our balance sheet was conservatively constructed going into year-end,” Lake told reporters. “Trading year-to-date has performed well.”
Investment-banking revenue fell 11 percent to $1.47 billion on a drop in debt-issuance revenue, which plunged 43 percent to $602 million amid declines in high-yield debt. Merger-advisory fees rose 43 percent to $622 million and equity underwriting slipped 4 percent to $314 million.
Profit from consumer and community banking rose 10 percent to $2.41 billion. Revenue from mortgage fees and related income increased 2 percent to $11.2 billion, fueled by higher card and auto results.
Citigroup Inc., the third-biggest U.S. bank by assets, and Wells Fargo & Co., the top U.S. mortgage lender, are scheduled to report results Friday. Bank of America Corp., Morgan Stanley and Goldman Sachs Group Inc. will report next week.