JPMorgan profit jumps 42% on reserve release, investment banking strength

[NEW YORK] JPMorgan Chase & Co reported a much better-than-expected 42 per cent jump in fourth-quarter profit on Friday, driven by the release of some of the reserves it had built up against coronavirus-driven loan losses and continued strength in its trading and investment banking units.

The bank's net income rose to US$12.1 billion, or US$3.79 per share, in the quarter ended Dec 31, from US$8.5 billion, or US$2.57 per share, a year earlier. Revenue rose 3 per cent to US$30.2 billion.

During the quarter, JPMorgan released credit reserves of US$2.9 billion, boosting its profit.

Excluding the reserves, the bank reported net income of US$9.9 billion, or US$3.07 a share, which was well ahead of Wall Street estimates of US$2.62 per share, according to Refinitiv.

Investment banking revenue surged 37 per cent to US$2.5 billion, driven by higher advisory fees across all its products.

"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 and will allow us to withstand an economic environment far worse than the current base forecasts by most economists," chief executive Jamie Dimon said.

The big US lenders spent 2020 grappling with the economic fallout of the Covid-19 pandemic, setting aside billions to cover expected loan losses. Analysts are expecting a rebound in their profits in 2021, as a number of banks start releasing reserves.

The pandemic also caused a plunge in short and long-term interest rates early in the year as the US Federal Reserve pumped money into the financial system to shore up the economy.

That led to a record reduction in net interest margins - the difference between what banks charge for loans and what they pay out to depositors.

Still, JPMorgan ended the year in better shape than most of its peer lenders, thanks to continued strength in investment banking and trading, which benefited from volatility in financial markets as investors reassessed their portfolios at the end of the year.

Citigroup and Wells Fargo are expected to report results later on Friday.

REUTERS