JPMorgan

JPMorgan Beats As FICC Is Predictable Blowout On Easy Comp. Dimon Cites ‘Complex Geopolitical Issues’

"We face a continued high level of complex geopolitical issues".

JPMorgan kicked off big bank earnings Tuesday with what looks like a solid beat on the top and bottom lines.

Q4 EPS was $2.57, better than the expected $2.36. Adjusted revenue of $29.21 billion is up 9%, and looks like a beat too. Annual earnings were a record $36.4 billion in 2019 – that’s the best year for any US bank in history, apparently.

NII was $14.3 billion, down 2%. The bank cites lower rates, which were “largely offset by balance sheet growth and mix as well as higher net interest income in CIB Markets”.

Q1 2019 was the high-water mark for Fed-assisted NII boosts. Banks came into last year expecting higher rates and continuing improvements in margins, but that all changed with the Fed’s dovish pivot. JPMorgan cut its NII forecast in July to $57.5 billion.

The bank sees Q1 2020 NII of about $14 billion. That’s slightly better than the $13.55 billion the street will be looking for.

FICC sales and trading revenue was $3.45 billion in the fourth quarter. That’s up a silly 86%, and well ahead of consensus, which was looking for $2.44 billion. FICC was a bright spot in Q3 for the bank as well, rising 25%. Equities sales and trading revenue was $1.51 billion. That’s up 15% YoY, and also ahead of estimates ($1.41 billion).

Overall, markets revenue of $5.0 billion was up 56% YoY. It was the best fourth quarter for the firm’s traders in at least 10 years.

The solid trading numbers were expected. The comp was easy (those of you old enough to remember Q4 2018 will recall that things were choppy, to say the least) and CFO Jennifer Piepszak last month tipped a “meaningful” improvement.

“I can tell you that we expect to be up meaningfully year on year, both FICC and equities, more so in FICC”, Piepszak said at a conference. Promise fulfilled.

Amid the turmoil that rippled through markets during 2018’s harrowing final quarter, JPMorgan’s bond traders posted their worst performance (in terms of revenue anyway) since the crisis. That contributed to the bank’s first profit miss in 15 quarters.

“We’re not immune from the weather”, Jamie Dimon said at the time.

Fast forward a year and that’s water under the bridge.

Investment banking revenue was $1.82 billion, up 6% YoY thanks to higher debt and equity underwriting fees partially offset by lower advisory fees. That looks just shy of the $1.84 billion the market was looking for.

The provision for credit losses was $1.43 billion in Q4. That’s -7.8% YoY and better than the estimated $1.53 billion. Net charge-offs jumped 21% to $1.49 billion from $1.24 billion a year earlier.

Commenting on the macro outlook, Dimon said “the US consumer continues to be in a strong position”. That, he remarked, is manifesting in the bank’s consumer businesses. “In Consumer & Community Banking, average deposits grew at 5% and we continued to add customers in new and existing markets, and deepen our customer relationships”, he said, adding that “the robust holiday season was reflected in our card sales volumes and loan balances, up 10% and 8%, respectively”.

Panning out, Dimon cautioned that “we face a continued high level of complex geopolitical issues” and noted that while global growth has “stabilized”, it’s “at a lower level”. “A resolution of some trade issues helped support client and market activity towards the end of the year”, he added.

Results

JPMResultsQ42019Prez

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