Robust advisory business, reserve release and a rise in loan demand drove JPMorgan’s (JPM - Free Report) fourth-quarter 2021 earnings of $3.33 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.01.
Results included net credit reserve releases. Excluding this, earnings came in at $2.86 per share.
Despite reporting better-than-expected earnings, shares of the company have lost almost 3.8% in pre-market trading. Investors seem to be disappointed with JPMorgan’s trading business performance and 2022 expense outlook. Equity markets revenues and fixed income markets revenues fell 2% and 16%, respectively, on a year-over-year basis. So, total markets revenues of $5.3 billion declined 11%.
During the quarter, operating expenses recorded an increase. Management expects adjusted non-interest expenses to be $77 billion this year.
Also, mortgage fees and related income plunged 59% to $315 million. Further, Commercial Banking average loan balances were down 2% year over year.
During the fourth quarter, the company reported net reserve releases of $1.8 billion on the back of “continued resilience in the macroeconomic environment.”
Regarding investment banking (“IB”) performance, equity and debt underwriting fees rose 12% and 14%, respectively. Continued stellar deal-making activities across the globe during the quarter led JPMorgan to record an 86% surge in advisory fees. Hence, IB fees jumped 37% from the prior-year quarter. Also, the company ranked #1 for global investment banking fees with a 9.5% wallet share for 2021.
While lower rates continued to hurt the bank’s interest income, it was more than offset by a rise in loan balance (up 6% year over year and 3% from the prior quarter).
Among other positives, Asset & Wealth Management average loan balances grew 18% from the year-ago quarter. Debit and credit card sales volume increased 26%, reflecting a steadily improving consumer confidence and economic outlook.
The overall performance of JPMorgan’s business segments, in terms of net income generation, was dismal. All segments, except Asset & Wealth Management, reported a decrease in net income on a year-over-year basis.
Thus, net income decreased 14% from the prior-year quarter to $10.4 billion. Excluding the above-mentioned reserve releases, net income was $9 billion.
Revenues Stable, Costs Rise
Net revenues as reported were $29.26 billion, relatively stable year over year. The top line lagged the Zacks Consensus Estimate of $29.95 billion.
Net interest income grew 3% year over year to $13.6 billion.
Non-interest income declined 3% to $15.6 billion, primarily due to a fall in mortgage banking and related fees, card income and principal transactions. These were partially offset by solid IB performance.
Non-interest expenses (on managed basis) were $17.9 billion, up 11%. This upswing was mainly due to a rise in compensation expenses.
Credit Quality Improves
Provision for credit losses was a net benefit of $1.3 billion compared with a benefit of $1.9 million in the prior-year quarter. Further, net charge-offs plunged 48% to $550 million.
As of Dec 31, 2021, non-performing assets were $8.3 billion, down 23% from Dec 31, 2020 level.
Solid Capital Position
Tier 1 capital ratio (estimated) was 15% at the fourth quarter-end, on par with the prior-year quarter level. Tier 1 common equity capital ratio (estimated) was 13%, down from 13.1%. Total capital ratio was 16.8% (estimated) compared with 17.3% as of Dec 31, 2020.
Book value per share was $88.07 as of Dec 31, 2021, compared with $81.75 in the corresponding period of 2020. Tangible book value per common share was $71.53 at the end of December, up from $66.11.
Share Repurchase Update
During the quarter, JPMorgan repurchased shares worth $1.9 billion.
Our View
New branch openings, strategic acquisitions, global expansion plan and robust IB performance are likely to continue supporting JPMorgan’s revenues. A rise in loan balance is a major tailwind as the economy re-opens. However, lower rates and disappointing trading and mortgage banking performance are near-term concerns.
JPMorgan currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Dates & Expectations of Other Major Banks
The PNC Financial Services Group (PNC - Free Report) is slated to report fourth-quarter and full-year 2021 results on Jan 18.
Over the past 30 days, the Zacks Consensus Estimate for PNC Financial’s quarterly earnings has moved marginally lower to $3.61. This indicates a 10.7% rise from the prior-year quarter.
Truist Financial (TFC - Free Report) is scheduled to announce fourth-quarter and 2021 numbers on Jan 18.
Over the past 30 days, the Zacks Consensus Estimate for Truist’s quarterly earnings has moved almost 1% lower to $1.26, suggesting a 6.8% increase from the prior-year reported number.
Bank of America (BAC - Free Report) is scheduled to announce fourth-quarter and full-year 2021 numbers on Jan 19.
Over the past 30 days, the Zacks Consensus Estimate for Bank of America’s quarterly earnings has moved 2.6% south to 96 cents, implying a 28.8% jump from the prior-year reported number.
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Robust advisory business, reserve release and a rise in loan demand drove JPMorgan’s (JPM - Free Report) fourth-quarter 2021 earnings of $3.33 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.01.
Results included net credit reserve releases. Excluding this, earnings came in at $2.86 per share.
Despite reporting better-than-expected earnings, shares of the company have lost almost 3.8% in pre-market trading. Investors seem to be disappointed with JPMorgan’s trading business performance and 2022 expense outlook. Equity markets revenues and fixed income markets revenues fell 2% and 16%, respectively, on a year-over-year basis. So, total markets revenues of $5.3 billion declined 11%.
During the quarter, operating expenses recorded an increase. Management expects adjusted non-interest expenses to be $77 billion this year.
Also, mortgage fees and related income plunged 59% to $315 million. Further, Commercial Banking average loan balances were down 2% year over year.
During the fourth quarter, the company reported net reserve releases of $1.8 billion on the back of “continued resilience in the macroeconomic environment.”
Regarding investment banking (“IB”) performance, equity and debt underwriting fees rose 12% and 14%, respectively. Continued stellar deal-making activities across the globe during the quarter led JPMorgan to record an 86% surge in advisory fees. Hence, IB fees jumped 37% from the prior-year quarter. Also, the company ranked #1 for global investment banking fees with a 9.5% wallet share for 2021.
While lower rates continued to hurt the bank’s interest income, it was more than offset by a rise in loan balance (up 6% year over year and 3% from the prior quarter).
Among other positives, Asset & Wealth Management average loan balances grew 18% from the year-ago quarter. Debit and credit card sales volume increased 26%, reflecting a steadily improving consumer confidence and economic outlook.
The overall performance of JPMorgan’s business segments, in terms of net income generation, was dismal. All segments, except Asset & Wealth Management, reported a decrease in net income on a year-over-year basis.
Thus, net income decreased 14% from the prior-year quarter to $10.4 billion. Excluding the above-mentioned reserve releases, net income was $9 billion.
Revenues Stable, Costs Rise
Net revenues as reported were $29.26 billion, relatively stable year over year. The top line lagged the Zacks Consensus Estimate of $29.95 billion.
Net interest income grew 3% year over year to $13.6 billion.
Non-interest income declined 3% to $15.6 billion, primarily due to a fall in mortgage banking and related fees, card income and principal transactions. These were partially offset by solid IB performance.
Non-interest expenses (on managed basis) were $17.9 billion, up 11%. This upswing was mainly due to a rise in compensation expenses.
Credit Quality Improves
Provision for credit losses was a net benefit of $1.3 billion compared with a benefit of $1.9 million in the prior-year quarter. Further, net charge-offs plunged 48% to $550 million.
As of Dec 31, 2021, non-performing assets were $8.3 billion, down 23% from Dec 31, 2020 level.
Solid Capital Position
Tier 1 capital ratio (estimated) was 15% at the fourth quarter-end, on par with the prior-year quarter level. Tier 1 common equity capital ratio (estimated) was 13%, down from 13.1%. Total capital ratio was 16.8% (estimated) compared with 17.3% as of Dec 31, 2020.
Book value per share was $88.07 as of Dec 31, 2021, compared with $81.75 in the corresponding period of 2020. Tangible book value per common share was $71.53 at the end of December, up from $66.11.
Share Repurchase Update
During the quarter, JPMorgan repurchased shares worth $1.9 billion.
Our View
New branch openings, strategic acquisitions, global expansion plan and robust IB performance are likely to continue supporting JPMorgan’s revenues. A rise in loan balance is a major tailwind as the economy re-opens. However, lower rates and disappointing trading and mortgage banking performance are near-term concerns.
JPMorgan currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Dates & Expectations of Other Major Banks
The PNC Financial Services Group (PNC - Free Report) is slated to report fourth-quarter and full-year 2021 results on Jan 18.
Over the past 30 days, the Zacks Consensus Estimate for PNC Financial’s quarterly earnings has moved marginally lower to $3.61. This indicates a 10.7% rise from the prior-year quarter.
Truist Financial (TFC - Free Report) is scheduled to announce fourth-quarter and 2021 numbers on Jan 18.
Over the past 30 days, the Zacks Consensus Estimate for Truist’s quarterly earnings has moved almost 1% lower to $1.26, suggesting a 6.8% increase from the prior-year reported number.
Bank of America (BAC - Free Report) is scheduled to announce fourth-quarter and full-year 2021 numbers on Jan 19.
Over the past 30 days, the Zacks Consensus Estimate for Bank of America’s quarterly earnings has moved 2.6% south to 96 cents, implying a 28.8% jump from the prior-year reported number.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How To Profit From Trillions On Spending For Infrastructure >>
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