CHARLOTTE, North Carolina: JPMorgan Chase, the US's largest bank by assets, said its fourth quarter profits jumped by 42 per cent from a year earlier, as the firm's investment banking division had a stellar quarter and its balance sheet improved despite the pandemic.
The New York-based bank said it earned a profit of US$12.14 billion, or US$3.79 per share, up from a profit of US$8.52 billion, or US$2.57 per share, in the same period a year ago. Excluding one-time items, the bank earned US$3.07 a share, which is well above the US$2.62 per share forecast analysts had for the bank.
The one-time item was JPMorgan “releasing” some of the funds it had set aside last year to cover potential loan losses caused by the coronavirus pandemic and subsequent recession. Banks had set aside tens of billions of dollars to cover potentially bad loans, and JPMorgan had been particularly aggressive in setting aside funds early in the pandemic.
Releasing those funds goes straight to a bank's bottom line when it reports its results, but it's not money that the bank generated from loans, customers or borrowers. It's just funds that were effectively put into escrow and are no longer in escrow.
The US$1.9 billion release is only a fraction of what JPMorgan set aside last year, and with the pandemic raging across the globe and particularly in the US, it's uncertain how much more the bank will release in the upcoming quarter.
“While positive vaccine and stimulus developments contributed to these reserve releases this quarter, our credit reserves of over US$30 billion continue to reflect significant near-term economic uncertainty,” said JPMorgan CEO Jamie Dimon in a statement.
The driver of JPMorgan's profits this quarter was the investment banking business. The corporate and investment bank posted a profit of US$5.35 billion compared with US$2.94 billion in the same period a year earlier. JPMorgan said it saw higher investment banking fees - money banks collect to advise companies on going public or buying other companies - as well as higher fees from its trading desks.