JPMorgan kicked off earnings season in the US with what looked like a mixed set of results.
$39.94 billion on the top-line was a miss, and EPS of $3.04 was well short of consensus too.
A 15% decline in reported net income (-21% excluding First Republic) was primarily due to the $2.9 billion FDIC special assessment. That cost JPMorgan $0.74 in EPS. That’s the price to Jamie Dimon, and JPMorgan shareholders, of the government protecting uninsured depositors during March’s regional banking turmoil. On the bright side, that short-lived drama delivered to Dimon an entire bank, a deal that’ll likely be seen, in hindsight, as a good one. For Dimon, I mean.
JPMorgan also took nearly three-quarters of a billion in net investment securities losses in Q4, lopping off another $0.19 in per share earnings. That, I assume, is the price of unloading US Treasurys and MBS at unfavorable marks.
Dimon called the Q4 results “solid,” not exactly a ringing endorsement in the context of CEO self-assessments. He reiterated that the bank’s record results for the full-year reflected “over-earning on both NII and credit.”
Markets (the business) looked a lot like it did last quarter at JPMorgan, which is to say FICC beat and equities trading was “meh.” FICC revenue of $4.03 billion rose 8% YoY, and easily topped estimates.
Equities sales and trading, on the other hand, was miss — $1.78 billion in revenue fell 8% from the same quarter a year ago and was short of the $1.93 billion the Street expected.
IB was underwhelming. Revenue of $1.58 billion was meaningfully below consensus ($1.72 billion).
Encouragingly (I guess) equities underwriting was the strongest in two years, but as the breakdown shown below makes clear, “strong” is a relative term. Debt underwriting fees were at least higher YoY (if you’re looking for a silver lining on that front).
This is still a pretty challenging environment. I doubt anyone will be too hard on the IB miss.
The standout — and I buried the lede, as I’m wont to do — was the NII guide. JPMorgan sees $90 billion in net interest income for 2024 ($88 billion excluding markets). Consensus was $86 billion.
For Q4, NII came in at $24.18 billion, more than a billion ahead of estimates. That represented a 19% YoY increase. The gain was more like 11.5% excluding First Republic.
The bank cited expectations for loan growth to “partially offset” lower rates in explaining the robust 2024 NII guide.
Dimon weighed in on the economy, of course, and a lot of other things besides. “The US economy continues to be resilient, with consumers still spending, and markets currently expect a soft landing,” he said, adding that,
It is important to note that the economy is being fueled by large amounts of government deficit spending and past stimulus. There is also an ongoing need for increased spending due to the green economy, the restructuring of global supply chains, higher military spending and rising healthcare costs. This may lead inflation to be stickier and rates to be higher than markets expect. On top of this, there are a number of downside risks to watch. Quantitative tightening is draining over $900 billion of liquidity from the system annually, and we have never seen a full cycle of tightening. And the ongoing wars in Ukraine and the Middle East have the potential to disrupt energy and food markets, migration, and military and economic relationships, in addition to their dreadful human cost. These significant and somewhat unprecedented forces cause us to remain cautious.
That’s a lot to worry about. And assuming Dimon wrote his remarks before Thursday evening, the situation in the Mideast is even more contentious now that it was when he digitally scribbled those musings (or barked them at a stenographer who makes twice the median household income).
Don’t fret, though. JPMorgan is ready. To serve you and to make a whole bunch of money doing it. Indeed, the bank’s $49.6 billion in 2023 profits were the most by any US lender in history.
“While we hope for the best, the past year demonstrated why we must be prepared for any environment,” Dimon said.
