JPMorgan Non-GAAP Revenues Beat, GAAP Miss; Earnings Boosted By $1.3 Billion Loan Reserve Release

Non-GAAP EPS, sure. But non-GAAP revenues? Up until today one would think that kind of accounting gimmickry is solely reserved for the profitless one-hit wonders of the world, i.e. Tesla, but moments ago we just saw JPM report two sets of revenues: one which was the firm’s GAAP revenue, and which was $23.156 billion, and another, far higher number, which was $24.112 billion which JPM described as revenue on a “managed basis” or also known as non-GAAP, and largely made up as they go along.

Here is how JPM explains what it is:

In addition to analyzing the Firm’s consolidated results on a reported basis, management reviews the Firm’s results and the results of the lines of business on a “managed” basis, which is a non-GAAP financial measure. The Firm’s definition of managed basis starts with the reported U.S. GAAP results and includes certain reclassifications to present total consolidated net revenue for the Firm (and total net revenue for each of the business segments) on a fully taxable-equivalent (“FTE”) basis. Accordingly, revenue from investments that receive tax credits and tax-exempt securities is presented in the managed results on a basis comparable to taxable securities and investments. This non-GAAP financial measure allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The corresponding income tax impact related to tax-exempt items is recorded within income tax expense. These adjustments have no impact on consolidated net income/(loss) as reported by the Firm or net income/(loss) as reported by the lines of business.

And some more:

The Firm implemented a Funding Valuation Adjustments (“FVA”) framework this quarter for its OTC derivatives and structured notes, reflecting an industry migration towards incorporating the cost or benefit of unsecured funding into valuations

 

For the first time this quarter, we were able to clearly observe the existence of funding costs in market clearing levels

As a result, the Firm recorded a $1.5B loss this quarter

 

Or, in short, trust us – the number is whatever we want it to be (although the fact that JPM now has funding costs in market clearing is disturbing). And it is thus, that JPM just beat revenue expectations of $24.08 billion on a non-GAAP basis, but missed on GAAP. Frankly, does anyone even care what JPM’s number are – just fast forward to the next litigation settlement.