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 bank.

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 increases.

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 billion.

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 year.

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 $4.23 billion.

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 compensation.

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(END) Dow Jones Newswires

January 14, 2020 12:07 ET (17:07 GMT)

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