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JPMorgan Chases Misses Earning’s Estimate

New York’s money center bank JPMorgan Chase & Co. (NYSE: JPM – $100.27) reported a profit of $7.07 billion, or $1.98 a share compared to $1.76 a year ago. Analysts, however, had fourth quarter earnings pegged at $2.20 a share. Costs for the period increased 6% to $15.7 billion from $14.9 billion a year earlier. Revenue rose 4.1% to $26.8 billion, shy of the average Street expectation of $26.83 billion. Part of the shortfall can be attributed to a decrease of 5.7% in the company’s trading revenue, which was made up of a 15% gain in equity trading and a 16% drop in fixed income. Higher interest rates boosted JPMorgan’s Consumer & Community Bank business. Profit was up 53% from the year-earlier period, driven largely by higher lending margins and an increase in credit-card balances. Yet the bank’s mortgage business struggled. Chase extended $17.2 billion in mortgages in the quarter, a decrease of 30% from the year-earlier fourth period. Overall profit in the Corporate and Investment segment was $2.0 billion, a roughly 15% decrease from $2.32 billion in the same period of 2017. Net income for its Commercial Banking business was $1.0 billion, an increase of 8% on net revenue of $2.3 billion, down 2%, with lower non-interest revenue more than offsetting higher net interest income. The Asset and Wealth Management segment had net income of $604 million, a decrease of 8%, with revenue of $3.4 billion, a decrease of 5%. The impact of lower market levels drove lower investment valuations, management and performance fees, partially offset by strong banking results and the impact of cumulative net long-term inflows. The company said it set aside $1.5 billion in the quarter to reserve against loans, especially ones in its credit card and commercial portfolios, that could potentially turn bad in the future. That compares with $968 million in the third quarter of 2018 and $1.35 billion in the fourth quarter of 2017.

       For the full-year 2018, Chase earned $8.98 per share and Wall Street is estimating this year at $9.93/share, affording a forward multiple of 10. JPMorgan shares have lost ground since the start of 2018, amid growing concerns regarding the possible negative effect of higher interest rates on economic activity. But the 3.2% dividend yield adds some appeal and the reasonably valued shares can continue to be held in aggressive accounts for recovery.

 

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