epa05101525 (FILE) A file photo dated 16 April 2009 showing a sign at a JPMorgan Chase building in New York, New York, USA. PMorgan Chase, the largest US bank by assets, released their 4th quarter results on 14 January 2016 saying their net income was 5.4 billion USD, an increase of 10 per cent. JPMorgan Chase said their net revenue was 23.7 billion USD, up one per cent, driven by higher revenue in corporate and consumer & community banking, largely offset by lower revenue in corporate and investment banking and asset management. EPA/JUSTIN LANE
NEW YORK: JPMorgan Chase & Co ended the year with a better-than-expected quarterly profit, helped by cost cuts and a smaller legal bill, and expressed confidence about its businesses in 2016 despite a grim start for stocks and energy prices.
The biggest US bank by assets - the first big lender to report since the Federal Reserve raised its key interest rate in mid-December - said it expected net interest income to rise by about US$2bil (RM8.78bil) as a result of the hike and loan growth.
JPMorgan forecast incremental increases in the amount of money set aside for losses on loans to the energy sector in the coming year, but said oil prices would need to remain at current levels for an extended period for provisions to be significant.
The bank’s shares rose as much as 3.5% in morning trading. Other bank shares also rose, as investors took JPMorgan’s results and positive noises about the US economy as indicators of the health of the sector.
US banks, like their global counterparts, have had a tough year as falling oil prices and worries about slowing growth in China contributed to weakness in credit markets.
However, chief executive Jamie Dimon told analysts that investors were adjusting to China’s slowdown, and said there were winners and losers in the commodity rout.
“Hopefully this will all settle down and it’s not the beginning of something really bad,” he said.
“We’re not forecasting a recession. We think the US economy looks pretty good at this point.”
Legal charges and the costs of meeting stricter capital requirements have also weighed on the lenders. And US interest rates remain near historic lows even after the Fed rate hike.
That has meant that cost cutting - the one thing banks can best control - has become a main driver of profits.
Two of the bank’s five business lines achieved profit increases - investment banking by 80% and consumer and community banking, the largest contributor to net income, by 10 percent. Income from commercial banking fell 21%.
JPMorgan’s total non-interest expenses fell 7.4% to US$14.26bil (RM62.63bil) in the quarter, while legal expenses fell to US$644mil (RM2.83bil) from US$1.1bil (RM4.83bil).
“We are very happy with our expense story for the year,” chief financial officer Marianne Lake said on a call with reporters.
Total compensation expenses fell 2.4% to US$6.69bil (RM29.38bil) as the bank’s employee count fell to 234,598, from 241,359 at the end of 2014.
Record annual earnings
JPMorgan’s net income rose 10.2% to US$5.43bil (RM23.85bil), boosting annual profit to a record US$24.44bil (RM107.34bil).
On a per-share basis, the bank earned US$1.32, handsomely beating the average analyst estimate of US$1.25 per share.
Total net revenue rose about 1% to US$23.75bil (RM104.31bil), topping the average estimate of US$22.89bil (RM100.53bil).
Revenue from fixed-income trading, usually JPMorgan’s most volatile business, fell 3% to US$2.57bil (RM11.29bil).
The bank’s balance sheet shrank 2.7% on a sequential basis to US$2.35 trillion (RM10.32 trillion) as of the end of December.
Like other big banks, JPMorgan has been shedding assets to appease regulators, who fear its size could pose a risk to the financial system in the event of a failure.
Provision for bad loans rose 49% to US$1.25bil (RM5.49bil).
JPMorgan’s shares were trading at US$58.82 in early afternoon trading.
The stock was the only one among the six big US banks to finish 2015 in positive territory, rising 5.5%.
But through Wednesday the shares had fallen 13.2% this year, the second worst performer in the Dow Jones industrial average.
Citigroup Inc and Wells Fargo & Co, the third and fourth biggest US banks, report on Friday. - Reuters
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