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JP Morgan Q4 Profit Climbs 53% On Higher Revenue, Lower Loan Loss Provisions

The largest U.S. bank by assets JP Morgan Chase & Co. (JPM: Quote) Wednesday said profit in the fourth quarter increased 53 percent from last year, driven by higher net revenue and lower loan loss provisions. The firm said separately that its chief executive Jamie Dimon's pay for 2012 was sharply reduced.

Net income for the quarter surged to $5.69 billion from $3.73 billion in the previous year. Earnings per share advanced to $1.39 from $0.90.

The latest results included $0.14 per share reduction for mortgage-related matters in Mortgage Banking, a $0.16 per share benefit from tax adjustments in Corporate as well as a $0.11 per share benefit from reduced mortgage loan loss reserves in Real Estate Portfolios.

On average, 24 analysts polled by Thomson Reuters expected the company to report profit per share of $1.16 for the quarter. Analysts' estimates typically exclude special items.

Total net revenues climbed 10 percent to $23.65 billion from $21.47 billion in the previous year. On a managed basis, revenues totaled $24.38 billion. Analysts expected revenue of $24.42 billion for the quarter.

Jamie Dimon, CEO, said, "The Firm's results reflected strong underlying performance across virtually all our businesses for the fourth quarter and the full year, with strong lending and deposit growth. We also maintained our leadership positions and continued to gain market share in key areas of our franchise."

Net interest income dropped 8 percent to $11.3 billion, reflecting the impact of low interest rates and runoff of higher-yielding loans, among others.

Provision for credit losses declined 70 percent to $656 million. Non-interest expense increased 10 percent to $16.05 billion.

Non-interest revenue climbed 32 percent to $13.1 billion due to higher mortgage fees and related income, increased investment banking fees and higher principal transactions revenue.

Segment-wise, Consumer & Community Banking or CCB revenues improved 10 percent to $12.38 billion and profit increased 28 percent to $2.01 billion amid lower provision for loan losses although noninterest expense climbed 18 percent.

Corporate & Investment Bank revenues increased 21 percent to $7.64 billion and profit more than doubled to $2 billion. Within the segment, Banking as well as Markets & Investor Services revenue improved in the quarter.

Commercial Banking net revenue rose 3 percent to $1.75 billion and net income advanced 8 percent to $692 million, driven by higher revenue and lower provision for credit losses, partially offset by higher noninterest expense. Asset Management net income increased 60 percent to $483 million, reflecting higher net revenue. Net revenue climbed 21 percent to $2.75 billion.

Return on common equity was 11 percent compared to 8 percent last year. Tier 1 capital ratio improved to 12.6 from 12.3.

Net income for 2012 climbed to $21.3 billion from $19.0 billion and earnings per share rose to $5.20 from $4.48 for 2011. Revenue on a managed basis was $99.9 billion, flat with last year. Analysts expected full year earnings of $4.97 per share on revenues of $98.55 billion.

Last year, JPMorgan had revealed that it sustained massive losses as a result of a bad bet by the Chief Investment Office related to credit derivatives. The losses eventually swelled to more than $6 billion. Bruno Iksil, the U.K. trader nicknamed the "London Whale", made wrong-way bets on credit derivatives that fueled the losses.

U.S. banking regulators on Monday ordered banking giant JPMorgan to improve its risk management oversight, following these massive losses. The company was also ordered to strengthen its anti-money laundering mechanism.

JPMorgan also said today that its Management Task Force and the independent Review Committee of the Board of Directors have each concluded their reviews relating to the 2012 losses by the JPM's Chief Investment Office and have released their respective reports.

JPMorgan said its Board approved $11.5 million compensation for Jamie Dimon for 2012. This includes salary of $1.5 million, flat with the prior year, and incentive compensation of $10 million, all in the form of restricted stock units, which is down 53.5 percent from the prior year.

The Board also deferred, for up to 18 months, vesting on options in the form of stock appreciation rights it had granted Dimon in January 2008.

The board said it took into consideration the continued strong performance of the firm, and the CIO losses, including Dimon's responsibility as the Firm's Chief Executive Officer, while deciding on the compensation.

JPM, which closed at $46.35 on Tuesday, is losing 1.3 percent in pre-market trading.

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by RTT Staff Writer

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