By David Benoit
JPMorgan Chase & Co.'s fourth-quarter profit soared, closing
out the bank's best year on record and producing more evidence that
the U.S. economy remains strong.
The nation's largest bank reported a profit of $8.52 billion, or
$2.57 a share. Analysts polled by FactSet had expected earnings of
$2.35 a share. A year earlier, the bank reported a profit of $7.07
billion, or $1.98 per share.
Revenue rose 9% to $28.33 billion from $26.11 billion a year
ago, topping analysts' expectations for $27.87 billion.
JPMorgan's giant retail bank -- which does business with around
half of all U.S. consumers -- continued to power the bank despite
falling interest rates that cut into lending margins. The bank's
customers spent more during the holiday season, boosting its
credit-card business, and took advantage of low interest rates to
take out mortgages.
Growth was especially strong in JPMorgan's corporate and
investment bank, where revenue rose 31% to $9.47 billion. That was
partly because of an easy comparison: Year-ago results were
hampered by dismal trading across the industry, particularly in
bonds, when market turmoil dried up volume.
For a while, companies and consumers were telling a different
story about the state of the economy. A trade deal with China and
brightening prospects for the global economy calmed JPMorgan's
corporate customers in the fourth quarter.
"The U.S. consumer remains in very strong shape, both from a
credit perspective, and spending sentiment," Chief Financial
Officer Jennifer Piepszak told analysts. Among corporate clients
"sentiment is at least certainly better than it was six months ago.
So we have a constructive outlook as we're heading into 2020."
Still, profit fell 9% in JPMorgan's commercial bank, which
caters to smaller companies than its corporate and investment
The Federal Reserve lowered its benchmark rate in October, its
third cut in 2019, cutting into JPMorgan's lending margins. Falling
interest rates are a mixed bag for banks: While they tend to reduce
what banks can charge for loans, they also can spur demand for
loans and lower deposit costs.
JPMorgan's net interest income -- what it makes from lending
minus the interest it pays out -- slipped 1% to $14.17 billion in
the fourth quarter, its first decline since the third quarter of
2015, just before the Fed began a series of nine rate
For the full year, it was another record for the bank. Revenue
rose 6% to $115.63 billion and profit rose 12% to $36.43
JPMorgan rose more than 40% in 2019 to hit a record. Still, the
bank continued buying back stock last year, lifting per-share
earnings. Shares rose 2% to $140.20 in Tuesday morning trading.
With rates expected to hold steady in 2020, the bank will face
questions about keeping returns high and whether to trim expenses,
which have been growing. Chief Executive James Dimon has pledged to
continue investing, especially in technology, even if the economy
sours. Total expenses rose 4% to $16.34 billion in the quarter and
3% for the full year.
Ms. Piepszak told analysts that, while the bank expects loan
balances to rise in 2020, low rates will put pressure on net
interest income. She said expenses would likely be flat for the
Return on tangible common equity, a key measure of
profitability, was 17% in the fourth quarter, compared with 14% a
year ago. It was 19% for the full year versus 17% for 2018.
The quarter's biggest growth came from its corporate and
investment bank, where profit rose 48% to $2.93 billion, with the
trading business improving from a weak year-ago quarter.
Revenue from fixed-income trading, the hardest-hit part of
markets in December 2018, rose 86% to $3.45 billion, though that is
less than each of the first three quarters in 2019.
Equities trading revenue rose 15% from the fourth quarter of
2018, but was down from the third quarter of 2019.
JPMorgan's consumer operation, which accounts for half of its
revenue and profit, also helped send the firm to another record
year. Revenue increased 3% to $14.04 billion, and profit rose 5% to
Credit-card loan volume rose 8% in the fourth quarter, and Chase
card customers spent $204.2 billion, 10% more than the prior year.
Card profit, however, fell 1% in the fourth quarter.
The bank set aside $1.2 billion for consumer credit losses, a
10% decrease. The drop reflects the release of funds it had
previously set aside for potential soured consumer loans and
optimism about its customers' financial health.
JPMorgan's asset-management operations earned $785 million in
profit, up 30%, on increased fees and lower costs, excluding
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(END) Dow Jones Newswires
January 14, 2020 12:07 ET (17:07 GMT)
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