Fall in expenses boosts JPMorgan

Share price responds positively to the group’s profit increase

JPMORGAN Chase’s fourthquarter profit increased 10 percent as expenses from litigation and employee compensation shrank, the biggest bank in the US said yesterday, adding that a regulatory burden would have a smaller impact on capital requirements than previously estimated.

JPMorgan Chase climbed 1.7 percent to $58.30 (R963) at 7.07am in New York.

The shares had dropped 13 percent this year to Wednesday, the second-worst performance on the Dow Jones industrial average.

Net income rose to $5.43 billion from $4.93bn a year earlier, according to JPMorgan Chase. Earnings were $1.40 a share, excluding litigation costs and accounting adjustments, beating the $1.27 average estimate of 29 analysts surveyed by Bloomberg.

Wall Street firms are under pressure to cut costs as revenue from fixed-income trading slumps. JPMorgan chief financial officer Marianne Lake said last month that the period had been quiet for bond and equity markets, adding that the Federal Reserve’s December 16 interest rate increase could provide a boost this year.

The company had only $99 million in litigation costs after a $318m benefit from a legal settlement. That compared with $990m in the fourth quarter of 2014.

Revenue rose 1 percent to $22.9bn in the fourth quarter. Non-interest expenses dropped by 7 percent to $14.3bn. The number of employees declined to 234 598, a drop of 3 percent.

JPMorgan said its surcharge for global systemically important banks – a closely watched measure that would determine its required capital ratio – fell to 3.5 percent after the company cut client deposits and reduced derivatives. The bank said about a year ago that it could be as high as 5 percent.

Earnings at the corporate and investment bank surged 80 percent to $1.75bn, driven by the lower legal expenses.

Revenue slipped 4 percent from a year earlier to $7.1bn on lower trading and investment banking. Fixed-income trading revenue dropped 3 percent to $2.57bn on lower commodities and credit activity. Equity trading revenue declined 7 percent to $1.06bn.

Investment banking revenue declined by 11 percent to $1.47bn on a drop in debtissuance revenue.

Profit from consumer and community banking rose 10 percent to $2.41bn. Revenue from mortgage fees and related income increased 2 percent to $11.2bn, fuelled by higher card and auto results.

Citigroup, the third-biggest US bank by assets, and Wells Fargo, the top US mortgage lender, are scheduled to report results today.

Bank of America, Morgan Stanley and Goldman Sachs Group will report their results next week. – Bloomberg