JPMorgan Chase & Co. (JPM) , the biggest U.S. bank, said fourth-quarter profit tumbled the most in at least in three years, as a prolonged slump in bond trading compounded the impact of big charges stemming from the U.S. tax law passed in December.
Net income fell by 37% to $4.23 billion, the New York-based bank said in a statement. Earnings per share slid to $1.07, or $1.76 excluding one-time gains and charges, the bank said. According to FactSet, the average analyst prediction of analysts was $1.69.
In premarket trading on Friday, Jan. 13, JPMorgan shares rose 0.2%.
Big Wall Street bond-trading houses like JPMorgan have been plagued over the past year by a spell of unusually low price swings in fixed-income and commodities markets, partly explained by the bounty of money pumped into global financial markets over the past decade by the Federal Reserve and other central banks. The fourth-quarter’s doldrums contrasted with those in late 2016, when President Donald Trump’s surprise election victory sent investors scrambling to reshape their portfolios for the prospect of big tax cuts.
JPMorgan CEO Jamie Dimon has expressed optimism on the global economy while predicting that looser regulations and Trump’s tax cuts will spur growth in lending and other banking businesses. Yet fixed-income trading — in government bonds, corporate bonds, commodities and foreign exchange — accounts for more than a tenth of the company’s total revenue, and it’s been mired in a slump.
Fixed-income trading revenue fell 34% in the quarter to $2.22 billion, JPMorgan said.
The business was driven by “continued low volatility” as well as a narrowing in the difference in yields between U.S. Treasuries and corporate bonds, as well as a $259 million charge related to the Tax Cuts and Jobs Act.
The total results included costs of $2.4 billion, or 69 cents a shares, related to the tax bill. The amount included costs to write down the value of tax credits that are now likely to be worthless, given the reduction in the corporate rate to 21% from 35%.
Dimon said that the tax law was a “significant positive outcome for the country” that would make U.S. companies “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,” Dimon predicted.
The company said it plans to increase and accelerate some “investments” in employees, customers and communities, he added.
JPMorgan’s consumer-banking revenue climbed by 10% to $12.1 billion, “predominantly driven by higher deposit margins and strong deposit growth,” as well as from higher credit-card loan balances and lending margins, the bank said.
Commercial-banking revenue increased by 10% to $2.35 billion, according to the company statement. Revenue in the asset and wealth management division increased 9% to $3.37 billion.
Total trading revenue was down 22% to $4.43 billion, including results in the fixed-income unit as well as stock-trading proceeds that were flat with the levels from the prior-year period.
Excluding the costs related to the new tax law, net income would have been down 1% to $6.7 billion.
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