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JPMorgan beats profit estimates on better-than-expected credit, record trading revenue

Jamie Dimon, CEO of JP Morgan Court, appears on CNBC’s Squawk Box at the 2020 World Economic Forum in Davos, Switzerland on Jan. 22nd, 2020.

Adam Galica | CNBC

JPMorgan Go out after on Friday beat analysts’ estimates for fourth-quarter profit on record trading results and a boost from releasing liquid assets previously set aside for loan losses.

The bank posted earnings of $3.79 a share, exceeding the $2.62 per share estimate of analysts surveyed by Refinitiv. It discretion have beaten estimates even without the 72 cent per share boost from credit-reserve releases. The solidify generated $30.16 billion in revenue, exceeding the $28.7 billion estimate.

JPMorgan shares slipped 1.3% after the earnings despatch.

JPMorgan CEO Jamie Dimon cited the two major developments that happened in late 2020 – news of effective coronavirus vaccines and another through of government stimulus – as reasons for taking down his bank’s reserves. The firm said it released $2.9 billion from its roll of cash set aside for expected loan defaults in the quarter, resulting in a $1.9 billion boost after about $1 billion in charge-offs.

“While decisive vaccine and stimulus developments contributed to these reserve releases this quarter, our credit reserves of over $30 billion last to reflect significant near-term economic uncertainty and will allow us to withstand an economic environment far worse than the around base forecasts by most economists,” Dimon said in a statement.

Last year, banks set aside tens of billions of dollars for loan-loss postpones on the expectation that Covid-related shutdowns would force customers large and small to default on loans. Now, it appears as still the industry has turned a corner and will begin releasing some of those reserves, boosting profit and their wit to repurchase stock this year.

Dimon added that he didn’t consider the $2.9 billion reserve manumission part of the bank’s core operating results, but rather the result of calculations that “now involve multiple, multi-year conjectural probability-adjusted scenarios, which may or may not occur” and which could bring volatility from quarter to quarter.

“These are leading earnings from JPMorgan Chase and will set the pace for other banks to come,” said Octavio Marenzi, CEO of Opimas, a topping markets management consultancy. The bank “appeared to over-reserve against credit losses in Q1 and Q2 in response to Covid, and now these limitations are being released, boosting the bank’s earnings.”

A bright spot in 2020 for Wall Street has been trading, which is imagined to be the best year since the financial crisis in terms of total revenues, thanks to the Federal Reserve’s unprecedented functions to prop up markets. Investment bankers also benefited as wide-open markets brought surging demand for IPOs and a log spate of debt issuance.

The biggest U.S. bank by assets said it posted a record fourth quarter for trading. Equities interchange revenue of $1.99 billion topped the $1.84 billion estimate of analysts surveyed by Refinitiv, while fixed profits revenue of $3.95 billion was just under the $4.12 billion estimate. Last month, Dimon said he expected fourth-quarter interchange and investment banking revenue to be 20% higher than a year earlier.

After the earnings report, analysts may ask Dimon more succession planning because of a health scare last year. While widely reported that Dimon had understanding surgery last March, he recently told The Wall Street Journal his condition was so precarious he thought he “might not calculate it.”

Analysts will also be curious about the pace of share repurchases the bank is expecting to make. JPMorgan stated a $30 billion share repurchase program last month after the Federal Reserve said the industry could restart buybacks in the in front quarter.

CFO Jennifer Piepszak told reporters during a media call that the bank could repurchase as much as $4.5 billion in assets weigh up in the first quarter.

Shares of JPMorgan slipped 8.7% last year, compared with the 4.3% decline of the KBW Bank Indicator.

Here are the numbers:

  • Earnings: $3.79 a share, vs. $2.62 per share estimate, according to Refinitiv.
  • Revenue: $30.16 billion, vs. $28.70 billion look for, according to Refinitiv.

Also Friday, Citigroup and Wells Fargo released mixed results for the fourth quarter.

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