JPMorgan earnings Q4 2020 beat profit and revenue estimates

JPMorgan Chase on Friday beat analysts’ estimates for fourth-quarter profit on record trading results and a boost from releasing money previously set aside for loan losses.

The bank posted earnings of $3.79 a share, exceeding the $2.62 per share estimate of analysts surveyed by Refinitiv. It would have beaten estimates even without the 72 cent per share boost from credit-reserve releases. The firm generated $30.16 billion in revenue, exceeding the $28.7 billion estimate.

JPMorgan shares slipped 1.3% after the earnings report.

JPMorgan CEO Jamie Dimon cited the two major developments that happened in late 2020 – news of effective coronavirus vaccines and another round of government stimulus – as reasons for taking down his bank’s reserves. The firm said it released $2.9 billion from its pile of cash set aside for expected loan defaults in the quarter, resulting in a $1.9 billion boost after about $1 billion in charge-offs.

“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,” Dimon said in a statement.

Last year, banks set aside tens of billions of dollars for loan-loss reserves on the expectation that Covid-related shutdowns would force customers large and small to default on loans. Now, it appears as though the industry has turned a corner and will begin releasing some of those reserves, boosting profit and their ability to repurchase stock this year.

Dimon added that he didn’t consider the $2.9 billion reserve release part of the bank’s core operating results, but rather the result of calculations that “now involve multiple, multi-year hypothetical probability-adjusted scenarios, which may or may not occur” and which could bring volatility from quarter to quarter.

“These are stellar earnings from JPMorgan Chase and will set the pace for other banks to come,” said Octavio Marenzi, CEO of Opimas, a capital markets management consultancy. The bank “appeared to over-reserve against credit losses in Q1 and Q2 in response to Covid, and now these reserves are being released, boosting the bank’s earnings.”

A bright spot in 2020 for Wall Street has been trading, which is expected to be the best year since the financial crisis in terms of total revenues, thanks to the Federal Reserve’s unprecedented actions to prop up markets. Investment bankers also benefited as wide-open markets brought surging demand for IPOs and a record spate of debt issuance.

The biggest U.S. bank by assets said it posted a record fourth quarter for trading. Equities trading revenue of $1.99 billion topped the $1.84 billion estimate of analysts surveyed by…