JPMorgan beats revenue estimates on better-than-expected credit score, buying and selling income

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

Adam Galica | CNBC

JPMorgan Chase beat analysts’ estimates for fourth-quarter profit on better-than-expected trading results and a boost from releasing money previously set aside for loan losses.

The company posted earnings of $3.79 a share, exceeding the $2.62 per share estimate of analysts surveyed by Refinitiv. The bank would’ve beat estimates even without the 72 cent per share boost from credit-reserve releases. The firm generated $30.16 billion in revenue, exceeding the $28.7 billion estimate.

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

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

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

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

Last month, Dimon said he expected fourth-quarter trading and investment banking revenue to be 20% higher than a year earlier.

Analysts may ask Dimon about succession planning after a health scare he had last year. While widely reported that Dimon had heart surgery last March, he only recently told the Wall Street Journal that his condition was so precarious he thought he “might not make it.”

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

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

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 expected, according to Refinitiv.

    This story is developing. Please check back for updates.

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