This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.nytimes.com/2018/01/12/business/dealbook/bank-quarterly-earnings.html

The article has changed 3 times. There is an RSS feed of changes available.

Version 0 Version 1
JPMorgan’s 4th-Quarter Profit Weathers $2.4 Billion Charge Tied to Tax Bill JPMorgan’s Profits Are Strong, and They’ll Likely Get Stronger
(about 4 hours later)
JPMorgan Chase announced fourth-quarter earnings on Friday that beat analysts’ estimates and kept the financial services company profitable despite a $2.4 billion charge related to the recently approved tax bill. JPMorgan Chase’s financial results came in slightly stronger than expected on Friday, despite a big one-time hit from the new tax law, and they indicate that the bank and its peers could grow even more profitable in the years ahead.
But revenue from the banking giant’s trading business fell, signaling Wall Street’s overall sluggishness in the midst of tighter regulations and placid global markets. JPMorgan’s results are an important bellwether for the entire financial industry. It’s the biggest bank in the United States by assets. And it’s the first large bank to report its quarterly and annual results, most likely foreshadowing the performances that its rivals will report over the next week.
JPMorgan and Wells Fargo, which also reported earnings on Friday, were the first of the biggest banks in the United States to detail how the changes to the tax code are affecting them. The law lowered the corporate tax rate to 21 percent from 35 percent, but also forced companies holding cash overseas to repatriate it and take one-time charges for doing so. In the fourth quarter, JPMorgan’s underlying finances were obscured by accounting for the new tax package, which slashed the corporate income tax rate and applied a new, lower rate to earnings that companies had been stockpiling overseas — and that they now need to bring back to the United States.
Although several companies have warned publicly that those charges would be in the billions of dollars, most stand to gain significantly in the long run from the tax bill. The changes prompted many banks and other corporations to rejigger their balance sheets to create the optimal mix of assets that ultimately will result in the lowest possible tax rate.
JPMorgan said it earned $4.2 billion in the quarter after accounting for the tax charge, compared with $6.7 billion in the same period a year earlier; full-year net income was $24.4 billion, compared with $24.7 billion in 2016. The one-time charge was slightly higher than the company’s chief financial officer, Marianne Lake, estimated last month that it would be. In the short term, that resulted in some modest pain: JPMorgan took a $2.4 billion charge, and Wells Fargo, which also reported its results Friday, logged $173 million in costs related to moving money back to the United States to comply with the tax law’s so-called repatriation provision.
Earnings per share were $1.07. Leaving aside the tax charge, they were $1.76. Analysts had expected $1.69 in per-share earnings before accounting for the impact of the tax overhaul. In the long run, though, the 21 percent corporate tax rate, down from 35 percent under the previous law, will be a huge boon to companies and their shareholders. JPMorgan, for example, said Friday that its effective tax rate would be about 19 percent — far lower than what it has paid in most past years.
Net income from consumer banking rose in the quarter compared with the same period a year ago, but net income from corporate and investment banking fell 32 percent. Fixed-income markets experienced the biggest drop compared with last’s year’s fourth quarter, and income from equities markets was flat. Wells Fargo is already enjoying the fruits of the new law. Despite the repatriation-related loss, it reaped an overall $3.35 billion gain from the new law. That propelled the San Francisco-based bank to a $6.2 billion total profit for the fourth quarter.
The company said it had maintained its ranking as the largest recipient of global investment banking fees. Without the one-time impacts from the new tax regime, JPMorgan’s profits were impressive. The bank raked in more than $24 billion in profits for the full year, consistent with its 2016 results. Analysts said the results were modestly better than they had expected.
Wells Fargo said its one-time charge related to the repatriation of funds from overseas was $173 million. It earned $6.2 billion in the fourth quarter and said the new law had provided an overall after-tax benefit of $3.35 billion. JPMorgan’s investment bank was again a laggard, with profits falling by about one-third from a year earlier. That was partly because of the industry’s continued struggle to make money trading bonds, currencies and commodities — a once-powerful business that has shriveled because of new regulations, changing market conditions and greater competition from companies other than banks.
Goldman Sachs, which is to report its fourth-quarter earnings on Jan. 17, said last month that it expected to take a $5 billion charge. But its consumer-banking business performed better, with profits climbing 11 percent. If the economy remains strong and interest rates rise, that business is likely to accelerate because JPMorgan and other banks will be able to increase the interest rates they charge on loans.