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JPMorgan’s 4th-quarter earnings smash forecasts as investment-banking profits soar

Business

JPMorgan CEO Jamie Dimon

Summary List Placement

  • JPMorgan reported fourth-quarter earnings on Friday.
  • The banking giant posted a 42% rise in net income, driven by its release of $2.9 billion in credit reserves.
  • CEO Jamie Dimon touted the bank’s robust results and record revenues in a “challenging year.”
  • Visit Business Insider’s homepage for more stories.

JPMorgan reported fourth-quarter earnings on Friday that beat the consensus estimates of analysts polled by Bloomberg.

The banking titan’s net income jumped 42%, largely due to its release of $2.9 billion in credit reserves. It had been building those reserves in recent quarters in anticipation of a wave of defaults sparked by the pandemic.

“JPMorgan Chase reported strong results in the fourth quarter of 2020, concluding a challenging year where we generated record revenue, benefiting from our diversified business model and dedicated employees,” CEO Jamie Dimon said in the earnings release.

“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.”

Here are the key numbers:

  • Net income: $12.14 billion versus $8.13 billion estimated
  • Earnings per share: $3.79 versus $2.65 estimated
  • Revenue: $30.2 billion versus $28.7 billion estimated

JPMorgan’s corporate and investment banking division was the standout performer, delivering a 17% increase in net revenue and a 82% rise in net income to $5.3 billion, fueled by reserve releases.

The rise in net revenue reflected a 37% jump in investment-banking revenues due to higher fees, as well as a 20% increase in markets revenue. That was fueled by the fixed-income division lifting its revenues by 15% to $4 billion, and the equity division’s revenues surging 32% to $2 billion.

JPMorgan’s commercial-banking business also outperformed with a 115% increase in net income to $2 billion, largely due to $1.2 billion in reserve releases.

Net revenues jumped 10% in the asset and wealth management division due to higher performance and management fees. However, higher expenses and a negligible benefit from credit-loss provisions meant net income slid 2% there.

Meanwhile, the Wall Street heavyweight’s consumer and community banking division posted an 8% drop in net revenue, reflecting lower margins on deposits.

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