Amid an expected trading weakness, strong investment banking results and higher rates drove JPMorgan’s (JPM - Free Report) fourth-quarter 2017 earnings of $1.76 per share, which handily surpassed the Zacks Consensus Estimate of $1.69. Results exclude a one-time tax-related charge of $2.4 billion or 69 cents per share.
Solid loan growth (driven mainly by improved credit card loans) and higher interest rates supported net interest income growth. Further, rise in investment banking fees and stable equity trading income supported the top line.
As expected, fixed income trading slumped during the quarter. Additionally, a decline in mortgage banking income, due to higher funding costs and fall in mortgage origination volume, was a headwind.
Apart from these, results were adversely impacted by a drastic surge in provision for credit losses, mainly due to reserve build in Card portfolio. Further, higher operating expenses was an undermining factor.
The overall performance of JPMorgan’s business segments, in terms of net income generation, was decent. All segments, except Corporate & Investment Bank, reported a rise in net income on a year-over-year basis.
Among other positives, both credit card sales volume and merchant processing volume grew 13%. Further, both Commercial Banking average core loan balances grew 7% and Asset Management average core loan balances rose 11%.
Net income (excluding charges related to tax act) was down 1% year over year to $6.7 billion.
Trading Weakness Offset by Higher Rates & Loan Growth, Costs Up
Managed net revenues of $25.5 billion in the quarter were up 5% from the year-ago quarter. Also, it compared favorably with the Zacks Consensus Estimate of $25 billion. Rising rates, loan growth and increase in auto lease revenues were the main reasons for the improvement. These were partially offset by lower trading revenues and mortgage banking fees.
Non-interest expenses (on managed basis) were $14.6 billion, up 5% from the year-ago quarter. The rise was primarily due to higher compensation expenses and auto loan depreciation, partially offset by a decline in legal costs.
