banks JPMorgan Markets

JPMorgan Disappoints: FICC Fail Drives First Profit Miss In 15 Quarters

"Challenging market conditions."

Well, it doesn’t look like Citi was a fluke.

On Monday, some fretted when the bank turned in grievous FICC results, which betrayed a 21% swan dive in the segment’s trading revenue in Q4. That appeared to suggest that while volatility might have been a boon for some bank results early in 2018, last quarter might have been a different story. By the end of the day, Citi had recovered (and then some) but the question was what it presaged for bank results on the whole.

Fast forward to Tuesday and JPMorgan just turned in a FICC miss of its own. Q4 FICC sales and trading revenue dove 18%, coming in at just $1.86 billion, missing estimates by what looks like a mile ($2.29 billion). That’s the worst quarter for the unit since the crisis. Equities sales and trading was inline at $1.32 billion.

The bank blames “challenging market conditions” for the revenue declines in credit trading, rates and commodities. Those declines were only partially offset by “strength” in EM. On equities trading, revenue came in at $1.3 billion – that’s up 15%, but it would have been just 2% were it not for that Steinhoff margin loan loss last year.

It looks like net charge-offs were up in cards, but the bank says that’s “in line with expectations.”

Meanwhile, the bottom line was a miss (EPS $1.98 versus consensus of $2.21) while adjusted revenue managed to meet estimates. That would appear to be the first profit whiff in 3 1/2 years.

Notably, this is second straight quarter of disappointing FICC results for the bank. In Q3, markets revenue fell 2% and fixed income revenue was down 10% YoY – that missed estimates pretty handily. Last quarter, they blamed it on “mild weakness in Rates, Financing, Credit Trading and Securitized Products, as a result of compressed margins and tighter financing spreads in competitive markets.”

One bright spot here looks like consumer card spending, which was up 10% from a year ago – maybe that will help allay concerns about the consumer amid proliferating fears of a downturn in the domestic economy.

In any case, the market hates that FICC number (I guess that’s what driving the weakness) – the shares are down sharply in the premarket.

JPM

(Bloomberg)

Full results

JPMQ41
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5 comments on “JPMorgan Disappoints: FICC Fail Drives First Profit Miss In 15 Quarters

  1. Anonymous says:

    There fixed people seemed to be off the mark all quarter.

  2. Harvey Darrow Cotton says:

    Alabama gets blown out in a championship game, and now there is a typo in a Heisenberg headline. 2019 will be a difficult year to navigate.

  3. JPM falls all the way…to where it was on January 3. Something is seriously wrong. Believing in market valuations right now is like believing in witchcraft. Or a large orange monster with a horn on top of his head.

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