JPMorgan Chase released the results from its fourth quarter Friday, beating analyst earnings expectations on an adjusted basis with $US1.76 a share.
Wall Street analysts had been expecting $US1.69 a share.
“2017 was a record year on many measures for JPMorgan Chase as we added clients and customers and delivered record EPS,” CEO Jamie Dimon said in a statement. “We had healthy growth in Treasury Services, Securities Services and Investment Banking – we were #1 in IB fees globally, a record for the firm. Commercial Banking and Asset & Wealth Management generated record revenue and net income.”
JPMorgan is the first of the big banks to report in what is expected to be an unconventional earnings cycle for the industry, mostly on account of the late-arriving tax law that has caused many banks to book losses on deferred tax assets that declined in value.
Indeed, accounting for that and other special items, JPMorgan posted earnings of $US1.07 a share. The bank took a $US2.4 billion hit from the new law, equivalent to $US0.69 a share, higher than the $US2 billion analysts had been expecting.
Nonetheless, Dimon praised the law, which should prove profitable for the bank in the long term:
“The enactment of tax reform in the fourth quarter is a significant positive outcome for the country. U.S. companies will be more competitive globally, which will ultimately benefit all Americans. The cumulative effect of retained and reinvested capital in the U.S. will help grow the economy, ultimately growing jobs and wages. We have always invested, even in difficult times, in our employees, customers and communities, and as a result of the tax plan we will be increasing and accelerating some of these investments.”
Here are the rest of the highlights:
- Fourth-quarter net revenue of $US25.5 billion.
- Net income of $US6.7 billion, after adjustments for the tax law and other special items.
- Average core loans up 6% year-over-year and 2% quarter-over-quarter.
- Net interest income was $US13.4 billion, up 11% thanks to rising interest rates and improving loan and deposit growth.
- Corporate and investment banking took a hit, with revenue falling 12% to $US7.5 billion and net income dropping 32% to $US2.3 billion.
- In trading, fixed-income revenue dropped 27%, not including impacts from the tax law.
- Equity trading was stable, apart from a mark-to-market loss of $US143 million on a margin loan to a client. The company later identified that client as Steinhoff International, the South African retailer embroiled in an accounting scandal.
- Despite the tax hit on repatriation, JPMorgan says most of its foreign cash is not coming back to US soil, thanks to capital and liquidity requirements in foreign entities.
More on tax impacts
The tax law cost the bank $US2.45 billion in the fourth quarter. That comes from a $US3.7 billion one-time hit for repatriated earnings, an $US800 million hit from the revaluation of foreign tax investments, and a $US2.1 billion gain on revaluing deferred tax losses.
Though the law sought to encourage corporations to bring foreign profits back to US soil, JPMorgan says no significant amount of cash is coming back to the US (emphasis ours): “No significant remittance of cash expected – we have capital and liquidity requirements in foreign entities – it is a deemed repatriation.”
The bank expects the law to stimulate the economy and its own business. JPMorgan anticipates a boost to investment-banking revenue as well as to corporate lending.