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Banking giant JPMorgan revealed a profit for the fourth quarter exceeded Wall Street’s estimates, but shares retraced by 3%.
Leading American multinational investment bank JPMorgan Chase & Co (NYSE: JPM) posted a profit for the fourth quarter on Friday, January 14th. Even though the bank’s figures surpassed the expectations by analysts, its shares dipped by 3.7% in premarket trading.
JPMorgan got a major boost in profit from the return of loan growth to parts of its business. In addition, the banking giant also benefited from relatively minimal credit losses. It cited a $1.8 billion net benefit from releasing reserves for loan losses that never materialized. JPMorgan’s reported revenue was $30.35 billion versus Wall Street’s projected $29.9 billion. However, the prominent bank could only manage earnings per share price of $3.33 compared to the consensus estimate of $3.01. JPMorgan explained that without the 47 cents per share boost derived from the net benefit, earnings per share would be $2.86 instead.
The billions of dollars earmarked by JPMorgan towards offsetting loan losses during the heat of the pandemic came to bear. This occurred even as the bank’s debtors held up better than expected. However, JPMorgan chief executive officer Jamie Dimon does not take this into account regarding business results. Dimon also touched on the general state of the US economy amid the emergence of new Covid variants. As he put it:
“The economy continues to do quite well despite headwinds related to the Omicron variant, inflation and supply chain bottlenecks. Credit continues to be healthy with exceptionally low net charge-offs, and we remain optimistic on US economic growth.”
How Insiders View the Latest JPMorgan Earnings Development
JPMorgan’s latest revenue represented only a 1% increase for Q4 due to a marked slowdown stemming from prevailing circumstances – including Covid. However, high banking fees offset most of the ‘perceived’ deficiency in cash inflow for the banking giant. According to JPMorgan, its non-interest expenses surged by 11% to $17.9 billion due to increased compensation costs. This figure even surpassed some analysts’ estimate of $17.63 billion.
Nonetheless, Octavio Marenzi, CEO of consultancy Opimas LLC sees it differently. In a statement, he blamed JP Morgan’s results on the bank’s relative incompetence in that regard. As Marenzi put it, “JPMorgan’s results were surprisingly weak and were hampered by uncharacteristically poor expense management.”
JPMorgan chief operating officer Daniel Pinto had predicted last month that the leading bank’s Q4 revenue would decline by 10%. Pinto’s reason for this assertion is the downslide from record levels in fixed income activities. Following a commendable year on various fronts, JPMorgan executives previously mulled the rigorous idea of investing in technology, even as analysts continue to question the bank’s expense outlook.
Besides JPMorgan Profit, Other Prominent Financial Institutions Also Post Better-than-expected Q4 Earnings
In addition to JPMorgan, other leading financial powerhouses such as Citigroup and Wells Fargo also recently posted better-than-expected Q4 earnings. Furthermore, just like JPM, shares of Citigroup fell in premarket trading while that of Wells Fargo rose.
Wells Fargo’s reported earnings per share was $1.38, compared to analysts’ estimate of $1.04 per share. In addition, reported revenue was $20.86 billion against the general consensus estimate of $18.79 billion. On the other hand, Citigroup’s reported earnings were $1.99 per share adjusted, against estimates of $1.72. Furthermore, the banking giant also reported a revenue of $17.02 billion compared to the general consensus estimate of $16.85 billion.