The nation’s largest bank starts the Q4 earnings season with a bang.
JPMorgan Chase (NYSE:JPM) got the fourth quarter earnings season off to a robust start, crushing estimates with a 58% year over year increase.
The nation’s largest bank saw revenue increase 10% to $43.7 billion, which exceeded estimates of $41.9 billion.
Net income rose 50% to $14 billion, while earnings per share jumped 58% to $4.81 per share. That crushed estimates of $4.09 earnings per share.
For the full fiscal year, JPMorgan Chase generated $180.6 billion in revenue, an 11% increase. Net income hit a record $58.5 billion, or $19.75 per share, up 18% year over year.
Investors were buying, as the stock rose about 2% on Wednesday to roughly $252 per share. JPMorgan Chase stock has gained roughly 48% over the past year.
Investment banking leads revenue surge
JPMorgan Chase got a big lift from its Commercial and Investment Bank (CIB) arm, which saw revenue spike 18% to $17.6 billion. Net income within this business rose 59% to $6.6 billion in Q4. Investment banking proved to be the biggest revenue driver, rising 46% to $2.6 billion. Investment banking fees rose 49%, buoyed by an uptick in M&A activity. Also, within this segment, Markets and Securities Services revenue grew 20% to $8.3 billion.
Asset and Wealth Management (AWM) also had a strong quarter, fueled by rising asset levels from a strong stock market. Revenue in the AWM arm was $5.8 billion, up 13% year over year. Net income in this business surged 25% to $1.5 billion.
The bank’s largest segment, Consumer and Community Banking (CCB) saw some improvement, but continued to lag in what remains a tough environment for banks due to high interest rates. Revenue increased 1% year over year to $18.4 billion, boosted by increases in home lending, card services and auto lending. However, net income was off 6% to $4.5 billion due to a 20% increase in provisions for credit losses.
Also, JPMorgan Chase improved its return on equity (ROE) to 17% from 12% in the same quarter a year ago, while the return on tangible common equity (ROTCE) rose to 21% from 15%.
Further, its overhead ratio – which measures expense management — remained at 53%, the same as the previous quarter. For this metric, the lower the better, as it means the firm requires lower expenses to generate revenue. Last year, the overhead ratio was 63%.
It also improved its liquidity with common equity tier 1 (CET1) capital of $276 billion and a CET1 ratio of 15.7%, well above the regulatory minimum. However, its net charge offs – bad debt that won’t be recovered – rose 9% to $2.4 billion, mainly due to a spike with card services. The net charge-off rate in card services was 3.30% while the overall NCO was 1.44%, up from 1.15% in the same quarter a year ago.
Inflation may persist “for some time”
JPMorgan Chase offered some guidance for 2025. The firm calls for $94 billion in net interest income this year, which would be up from $93 billion. But excluding Markets, net interest income is projected to be $90 billion, which would be down slightly from $92.4 billion in 2024.
Also, it anticipates expenses of $95 billion, up from $92 billion in 2024. Further, the company targets a net charge-off ratio of 3.60% within card services, up from 3.34% in 2024.
CEO Jamie Dimon offered his outlook for 2025, saying businesses are “more optimistic about the economy, and they are encouraged by expectations for a more pro-growth agenda and improved collaboration between government and business.”
However, Dimon cited two significant risks, including inflation.
“Ongoing and future spending requirements will likely be inflationary, and therefore, inflation may persist for some time,” he said.
The second risk is geopolitical conditions, which he said remains “the most dangerous and complicated since World War II.”
It’s “not about weakening regulation”
On the regulatory environment, which is expected to be more favorable for banks, Dimon said it’s possible to be safe and promote growth.
“Regarding regulation, we have consistently said that regulation should be designed to effectively balance promoting economic growth and maintaining a safe and sound banking system,” Dimon said. “It is possible to achieve both goals. This is not about weakening regulation — we maintain a fortress balance sheet, evidenced by $547 billion of total loss-absorbing capacity and $1.4 trillion of cash and marketable securities — but rather about setting rules that are transparent, fair, holistic in their approach and based on rigorous data analysis, so that banks can play their critical role in the economy and markets.”
JPMorgan Chase is cheap with a P/E ratio of 14. Analysts set a median price target of $250 per share, which suggests little movement. With investment banking expected to pick up and its fortress balance sheet, I’d be a bit more bullish than that at this valuation.
