Dive Brief:
- Profit at JPMorgan Chase fell 14% in 2021’s fourth quarter to $10.4 billion, compared with $12.1 billion in 2020’s comparable three-month span, the bank said Friday.
- Despite that, the bank’s net profit for the year reached a record $48.3 billion, besting its 2019 high of $36.4 billion by 32.7%.
- The bank’s mergers-and-acquisitions advisers rode a deal-making boom that pushed that segment's fees up 86% in the fourth quarter.
Dive Insight:
Despite record growth from a 12-month perspective, some segments of the bank saw significant bumps in the short term. Fixed-income trading revenue dropped 16% in the fourth quarter compared with a year earlier. That sent overall trading revenue down 11%.
Operating expenses saw an 11% jump to $17.9 billion, as the bank credited a boost in compensation.
"It is true that labor markets are tight, that there’s a little bit of labor inflation, and it’s important for us to attract and retain the best talent and pay competitively according to performance," JPMorgan Chase CFO Jeremy Barnum said on Friday’s earnings call, according to CNBC.
Along with fourth-quarter results, the bank released guidance for 2022, in which it estimated its net interest income — the difference between what banks pay on deposits and what they earn on loans and other assets — would remain around $50 billion, keeping the figure below pre-pandemic levels. By comparison, net interest income reached $52.3 billion for 2021 after a 3% fourth-quarter rise.
The bank released $1.8 billion of its loan-loss reserves in the fourth quarter, pushing to $9 billion the amount it released over 2021. JPMorgan set aside $19 billion in 2020.
Double-digit percentage-point gains weren’t limited to M&A. The bank saw a 29% jump in credit card spending throughout the fourth quarter, and a 30% increase in mortgage originations. Deposits at the bank notched up 17%. However, revenue at JPMorgan’s consumer bank dropped 4%.
"The economy continues to do quite well despite headwinds related to [COVID-19’s] omicron variant, inflation and supply-chain bottlenecks," JPMorgan Chase CEO Jamie Dimon said in a statement Friday. "Credit continues to be healthy with exceptionally low net charge-offs, and we remain optimistic on U.S. economic growth as business sentiment is upbeat and consumers are benefiting from job and wage growth."
Revenue overall stayed relatively flat at $29.3 billion, although the figure for the full year increased 1% to a bank-record $121.6 billion, with the investment bank, commercial bank and asset and wealth management division all tallying highs. Fourth-quarter revenue jumped 2% for the corporate and investment bank, 6% for the commercial bank and 16% for asset and wealth management.
However, the earnings report’s negative points stuck with Octavio Marenzi, CEO of consultancy Opimas LLC. "JPMorgan’s results were surprisingly weak and were hampered by uncharacteristically poor expense management," Marenzi said Friday in an emailed statement to Bloomberg. "The real surprise came in the 5% [quarter-over-quarter] increase in non-interest expense, which looks difficult to justify."
