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JPMorgan (JPM) Q1 Earnings Beat on Reserve Release, Fee Income
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Large reserve releases, along with solid capital markets performance, drove JPMorgan’s (JPM - Free Report) first-quarter 2021 earnings of $4.50 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.05.
Results included credit reserve releases and the contribution to the company’s foundation. Excluding these, earnings amounted to $3.31 per share. The company had earned 78 cents in the prior-year quarter.
During the quarter, the company reported credit reserve releases. In a statement, the CEO Jamie Dimon said, “These results include a benefit from credit reserve releases of $5.2 billion that we do not consider core or recurring profits. We believe our credit reserves of $26 billion are appropriate and prudent, all things considered.”
As expected, fixed income markets revenues increased 15%, driven by strong performance in securitized products and credit. Likewise, equity markets revenues surged 47% on the back of solid performance across products. Also, historically lower rates drove mortgage fees and related income to $704 million, soaring 120%.
Further, equity and debt underwriting fees surged 219% and 17%, respectively. Additionally, continued stellar deal making activities during the quarter led JPMorgan to record a 35% rise in advisory fees. Hence, investment banking fees jumped 57% from the prior-year quarter.
Among other positives, Asset & Wealth Management average loan balances grew 18% from the year-ago quarter. Credit card sales volume rose 3%.
However, low interest rates and soft loan demand hurt interest income. Also, operating expenses witnessed a rise. Further, Commercial Banking average loan balances were down 2% year over year.
Overall performance of JPMorgan’s business segments, in terms of net income generation, was decent. All segments reported an increase in net income on a year-over-year basis. However, the Corporate segment’s loss widened.
Net income increased substantially from the prior-year quarter to $14.3 billion.
Fee Income Aids Revenues, Costs Rise
Net revenues as reported were $32.3 billion, up 14% from the year-ago quarter. The improvement reflects higher trading, mortgage and investment banking fees, while lower interest rates were an offsetting factor. Also, the top line beat the Zacks Consensus Estimate of $30.1 billion.
Net interest income declined 11% year over year to $12.9 billion. Conversely, non-interest income surged 40% to $19.4 billion, mainly driven by mortgage banking, investment banking and principal transactions performance.
Non-interest expenses (on managed basis) were $18.7 billion, up 12% from the year-ago quarter. The rise was primarily due to higher volume- and revenue-related expenses, and continued investments in business.
Credit Quality: Mixed Bag
Provision for credit losses was a net benefit $4.2 billion against a provision of $8.3 billion in the prior-year quarter. Further, net charge-offs decreased 28% to $1.1 billion.
As of Mar 31, 2021, non-performing assets were $10.3 billion, which was up 45% from Mar 31, 2020 level.
Solid Capital Position
Tier 1 capital ratio (estimated) was 15.0% at first quarter-end compared with 13.3% on Mar 31, 2020. Tier 1 common equity capital ratio (estimated) was 13.1%, up from 11.5%. Total capital ratio was 17.2% (estimated) compared with 15.5% as of Mar 31, 2020.
Book value per share was $82.31 as of Mar 31, 2021 compared with $75.88 in the corresponding period of 2020. Tangible book value per common share was $66.56 at the end of March, up from $60.71.
Share Repurchase Update
During the quarter, JPMorgan repurchased shares worth $4.3 billion. It must be noted that the company resumed buybacks following approval for the same from the Federal Reserve in December 2020.
Our View
Branch expansion efforts, and solid trading as well as mortgage banking and underwriting performances are likely to continue supporting JPMorgan’s revenues. However, lower interest rates and soft loan demand are near-term concerns.
JPMorgan Chase & Co. Price, Consensus and EPS Surprise
Bank of America (BAC - Free Report) , Citigroup (C - Free Report) and Truist Financial (TFC - Free Report) are scheduled to come out with quarterly numbers on Apr 15.
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JPMorgan (JPM) Q1 Earnings Beat on Reserve Release, Fee Income
Large reserve releases, along with solid capital markets performance, drove JPMorgan’s (JPM - Free Report) first-quarter 2021 earnings of $4.50 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.05.
Results included credit reserve releases and the contribution to the company’s foundation. Excluding these, earnings amounted to $3.31 per share. The company had earned 78 cents in the prior-year quarter.
During the quarter, the company reported credit reserve releases. In a statement, the CEO Jamie Dimon said, “These results include a benefit from credit reserve releases of $5.2 billion that we do not consider core or recurring profits. We believe our credit reserves of $26 billion are appropriate and prudent, all things considered.”
As expected, fixed income markets revenues increased 15%, driven by strong performance in securitized products and credit. Likewise, equity markets revenues surged 47% on the back of solid performance across products. Also, historically lower rates drove mortgage fees and related income to $704 million, soaring 120%.
Further, equity and debt underwriting fees surged 219% and 17%, respectively. Additionally, continued stellar deal making activities during the quarter led JPMorgan to record a 35% rise in advisory fees. Hence, investment banking fees jumped 57% from the prior-year quarter.
Among other positives, Asset & Wealth Management average loan balances grew 18% from the year-ago quarter. Credit card sales volume rose 3%.
However, low interest rates and soft loan demand hurt interest income. Also, operating expenses witnessed a rise. Further, Commercial Banking average loan balances were down 2% year over year.
Overall performance of JPMorgan’s business segments, in terms of net income generation, was decent. All segments reported an increase in net income on a year-over-year basis. However, the Corporate segment’s loss widened.
Net income increased substantially from the prior-year quarter to $14.3 billion.
Fee Income Aids Revenues, Costs Rise
Net revenues as reported were $32.3 billion, up 14% from the year-ago quarter. The improvement reflects higher trading, mortgage and investment banking fees, while lower interest rates were an offsetting factor. Also, the top line beat the Zacks Consensus Estimate of $30.1 billion.
Net interest income declined 11% year over year to $12.9 billion. Conversely, non-interest income surged 40% to $19.4 billion, mainly driven by mortgage banking, investment banking and principal transactions performance.
Non-interest expenses (on managed basis) were $18.7 billion, up 12% from the year-ago quarter. The rise was primarily due to higher volume- and revenue-related expenses, and continued investments in business.
Credit Quality: Mixed Bag
Provision for credit losses was a net benefit $4.2 billion against a provision of $8.3 billion in the prior-year quarter. Further, net charge-offs decreased 28% to $1.1 billion.
As of Mar 31, 2021, non-performing assets were $10.3 billion, which was up 45% from Mar 31, 2020 level.
Solid Capital Position
Tier 1 capital ratio (estimated) was 15.0% at first quarter-end compared with 13.3% on Mar 31, 2020. Tier 1 common equity capital ratio (estimated) was 13.1%, up from 11.5%. Total capital ratio was 17.2% (estimated) compared with 15.5% as of Mar 31, 2020.
Book value per share was $82.31 as of Mar 31, 2021 compared with $75.88 in the corresponding period of 2020. Tangible book value per common share was $66.56 at the end of March, up from $60.71.
Share Repurchase Update
During the quarter, JPMorgan repurchased shares worth $4.3 billion. It must be noted that the company resumed buybacks following approval for the same from the Federal Reserve in December 2020.
Our View
Branch expansion efforts, and solid trading as well as mortgage banking and underwriting performances are likely to continue supporting JPMorgan’s revenues. However, lower interest rates and soft loan demand are near-term concerns.
JPMorgan Chase & Co. Price, Consensus and EPS Surprise
JPMorgan Chase & Co. price-consensus-eps-surprise-chart | JPMorgan Chase & Co. Quote
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 Date of Other Major Banks
Bank of America (BAC - Free Report) , Citigroup (C - Free Report) and Truist Financial (TFC - Free Report) are scheduled to come out with quarterly numbers on Apr 15.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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