It has been about a month since the last earnings report for JPMorgan Chase & Co. (JPM Quick QuoteJPM - Free Report) . Shares have added about 0.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is JPMorgan Chase & Co. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

JPMorgan Q4 Earnings Beat Estimates on Reserve Release, Fee Income

Unexpected large reserve releases, along with solid capital markets performance, drove JPMorgan’s fourth-quarter 2020 earnings of $3.79 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $2.72.

Results included credit reserve releases. Excluding these, earnings amounted to $3.07 per share. The company had earned $2.57 in the prior-year quarter.

During the quarter, the company reported credit reserve releases, which led to net benefit of $1.9 billion. In a statement, the CEO Jamie Dimon said, “While positive vaccine and stimulus developments contributed to these reserve releases this quarter, our credit reserves of over $30 billion continue to reflect significant near-term economic uncertainty and will allow us to withstand an economic environment far worse than the current base forecasts by most economists.”

As expected, fixed income markets revenues increased 15%, driven by strong performance across products. Likewise, equity markets revenues jumped 32% on the back of solid client activities. Also, historically lower rates drove mortgage fees and related income to $767 million, up 62%.

Further, equity and debt underwriting fees surged 88% and 23%, respectively. Additionally, a significant rebound in deal making activities during the quarter led JPMorgan to record a 19% rise in advisory fees. Hence, investment banking fees jumped 34% from the prior-year quarter.

Also, operating expenses witnessed a fall. Among other positives, Commercial Banking average loan balances were up 1%, and Asset & Wealth Management average loan balances grew 15% from the year-ago quarter.

However, low interest rates and soft loan demand hurt interest income. Credit card sales volume declined 4% from the prior-year quarter.

Overall quarterly performance of JPMorgan’s business segments, in terms of net income generation, was decent. All segments, except Asset & Wealth Management, reported an increase in net income on a year-over-year basis. Even the Corporate segment’s loss narrowed.

Net income increased 42% from the prior-year quarter to $12.1 billion.

Fee Income Aids Revenues, Costs Fall

Net revenues as reported were $29.22 billion, up 3% from the year-ago quarter. The improvement reflects higher trading, mortgage and investment banking fees, while lower interest rates were an offsetting factor. However, the top line marginally missed the Zacks Consensus Estimate of $29.28 billion.

Net interest income declined 6% year over year to $13.3 billion. Conversely, non-interest income grew 13% to $16 billion, mainly driven by mortgage banking, investment banking and principal transactions performance.

Non-interest expenses (on managed basis) were $16 billion, down 1% from the year-ago quarter. The fall was primarily due to lower volume- and revenue-related expenses, partly offset by rise in investments in business.

Credit Quality: Mixed Bag

Provision for credit losses was a net benefit $1.9 billion compared with provision of $1.4 billion in the prior-year quarter. Further, net charge-offs (NCOs) decreased 30% to $1.1 billion. As of Dec 31, 2020, non-performing assets were $10.9 billion, which was up substantially from $5.1 billion recorded as of Dec 31, 2019.

Solid Capital & Liquidity Position

Tier 1 capital ratio (estimated) was 15% at fourth quarter-end compared with 14.1% on Dec 31, 2019. Tier 1 common equity capital ratio (estimated) was 13.1%, up from 12.4%. Total capital ratio was 17.3% (estimated) compared with 16.0% as of Dec 31, 2019.

Book value per share was $81.75 as of Dec 31, 2020 compared with $75.98 in the corresponding period of 2019. Tangible book value per common share was $66.11 at the end of December, up from $60.98.

JPMorgan ended 2020 with $1.4 trillion of cash and marketable securities, which as pointed by Dimon “is currently over $450 billion in excess of what is required.”

2021 Outlook

Management anticipates NII to be $55.5 billion, up almost 2% from $54.6 billion in 2020. The rise is likely to be driven by steepening of the yield curve, higher markets NII, strong deposit growth and improvement in loan demand in the later half of the year, partially offset by lower rates.

On the cost front, the company expects expenses to be $68 billion, up from previously guidance figure of $67 billion. The year-over-year rise in expenses is largely due to “revenue and volume-related expenses” and the impact of foreign exchange as well as expenses related to the acquisition of cxLoyalty. Also, the bank has plans to make investments worth $12.4 billion during the year, largely related to business expansions and technology upgrades.

Further, management expects meaningful increase in NCOs in the second half of 2021 and this could be even later with the recent stimulus.

First-Quarter 2021 Outlook

NII is expected to be roughly $13.6 billion.

The company expects IB fees to be up modestly, with overall pipeline remaining robust. Further, merger and acquisitions (M&As) are expected to be active, given the improvement in “overall CEO confidence.” Momentum in equity capital markets is anticipated to continue.

Markets revenues are projected to remain solid, given the strong performance witnessed “since the start of January, but it’s obviously too early to predict the full quarter.”

Segment Outlook Under Normalized Environment

For CCB, ROE is projected to be nearly 25% and overhead ratio of 50-55%. Further, NCOs are likely to be higher in the second half of 2021 compared with the first half.

For CIB, ROE is expected to be approximately 16% and revenues roughly $43 billion, with overhead ratio of nearly 54%.

After recording impressive gross IB revenues of $3.3 billion in fourth-quarter 2020, management now expects the same to be $4 billion in the long-term. Further, the company maintained long-term target of $1 billion each for expansion in markets revenues and international revenues.

For CB, ROE is expected to be approximately 18% and overhead ratio of nearly 40%.

For AWM, revenue growth is expected to be 5% and both pre-tax margin as well as ROE of roughly 25%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 9.85% due to these changes.

VGM Scores

Currently, JPMorgan Chase & Co. has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, JPMorgan Chase & Co. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.