JPM Reports Record Revenue Offset By Surprise Jump In Credit Loss Provisions

JPMorgan has officially launched the Q4 earnings season with earnings that were broadly stronger than expected, reporting record adjusted profits of $12.1 BN (which however include $2.9BN in reserve releases) although a higher than expected loan loss reserve provision initially hit the stock, sparking the usual question of what does JPM - the largest US bank - know that the rest of us don't.

Here is what JPM reported for Q4:

  • EPS $3.79 vs. $2.57 Y/Y, beating est. of $2.62
  • Record adjusted net income $12.1, up 42% Y/Y
  • Adjusted Revenue of $30.2BN vs $29.2BN Y/Y, up 3.3% Y/Y, and also beating est. of $28.6

Adding to the bullish picture, JPM's trading desk as usual had another stellar quarter, with FICC, equities and IBanking all beating expectations:

  • FICC sales & trading revenue $3.95 billion, +15% y/y, estimate $3.92 billion, driven by "strong performance in Credit, Currencies & Emerging Markets and Commodities"
  • Equities sales & trading revenue $1.99 billion, +32% y/y, estimate $1.79 billion, driven by "strong client activity in derivatives and Cash Equities"
  • Investment banking revenue $2.50 billion, +37% y/y, estimate $2.06 billion

Curiously, despite the surge in trading revenue, the company slashed trader comp again: "Expense of $4.9B, down 9% YoY,  driven by lower compensation and lower legal expense." How long before JPM's superstar traders start quitting?

But while the top and bottom-line numbers were all stronger than expected, what surprised traders was the unexpectedly high credit loss provision, which at $1.89BN was half a billion higher than the $1.39BN expected.

This was well above the loss provision recorded last quarter, and the highest in recent history except the covid crisis quarters:

Adding to the confusion, JPM also unveiled a $2.9 billion reserve release in Q4, bringing total reserves from $33.8BN to $30.8BN in Q4:

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