JPMorgan Chase & Co. (NYSE: JPM – $86.95), the nation’s largest bank, set a new record-high after reporting strong trading volume that lifted earnings. Excluding an extraordinary tax benefit, the bank earned $1.58 per share, well above the average analyst estimate of $1.44 per share and 20% above last year’s $1.32. Full-year adjusted earnings ended at $6.06 per share. Net revenue was $24.3 billion, up 2%. Revenue from fixed-income trading – the bank’s most volatile business – rose 31% to $3.4 billion, while stock trading revenue increased 8% to $1.2 billion. Net interest income was $12.1 billion, up 5%, primarily driven by loan growth and the net impact of higher rates, partially offset by lower investment securities balances. Non-interest revenue was $12.3 billion, flat compared with the prior-year quarter. In a statement discussing results, CEO Jamie Dimon cited those market trends, as well as growth in deposits and loans, higher credit card sales and competitive gains in “virtually all” of JPMorgan’s businesses. The bank also kept a tight lid on expenses.
Looking ahead, big banks are expected to benefit this year from rising interest rates, which allow them to charge more money for loans. The Federal Reserve, which raised a key rate target by a quarter of a percentage point in December, is expected to raise them again three times in 2017. A moderation from over-regulation will also provide some tailwinds for banks, which despite a recent post-election run, are still undervalued. The shares of JPM are also yielding 2.2% and future payout hikes this year are probable and analysts are estimating full-year 2017 profits at $7.40 per share. The company’s long-term prospects also look good. JPMorgan Chase has strong market shares in the investment banking and credit card businesses and investments in its operations, including technology, additional commercial bankers and offices, should pay off in time.