JPMorgan’s 4th-quarter earnings smash forecasts as trading revenues soar

• JPMorgan reported fourth-quarter earnings on Friday.
• The banking giant posted a 42% rise in net income, driven by its release of $2.9 billion in credit reserves.
• CEO Jamie Dimon touted the bank’s robust results and record revenues in a “challenging year.”
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JPMorgan reported fourth-quarter earnings on Friday that beat the consensus estimates of analysts polled by Bloomberg.

The banking titan’s net income jumped 42%, largely due to its release of $2.9 billion in credit reserves. It had been building those reserves in recent quarters in anticipation of a wave of defaults sparked by the pandemic.

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“JPMorgan Chase reported strong results in the fourth quarter of 2020, concluding a challenging year where we generated record revenue, benefiting from our diversified business model and dedicated employees,” CEO Jamie Dimon said in the earnings release.

"While positive vaccine and stimulus developments contributed to these reserve releases this quarter, our credit reserves of over $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."

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Here are the key numbers:

• Net income: $12.14 billion versus $8.13 billion estimated
• Earnings per share: $3.79 versus $2.65 estimated
• Revenue: $30.2 billion versus $28.7 billion estimated

JPMorgan's corporate and investment-banking division was the standout performer, delivering a 17% increase in net revenue as well as a 82% rise in net income to $5.3 billion, fueled by reserve releases.

The segment's higher sales reflected a 37% jump in investment-banking revenues due to higher fees, as well as a 20% increase in trading revenues. That was fueled by a 15% rise in revenues to $4 billion in the fixed-income division, and the equity division's revenues surging 32% to $2 billion.

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JPMorgan's commercial-banking business also outperformed with a 115% increase in net income to $2 billion, largely due to $1.2 billion in reserve releases.

Net revenues jumped 10% in the asset-and-wealth management division due to larger performance and management fees. However, higher expenses and a negligible benefit from reserve releases meant net income slid 2% there.

Meanwhile, the Wall Street heavyweight's consumer-and-community banking division posted an 8% drop in net revenue to $12.7 billion, reflecting lower margins on deposits.