JP Morgan Tops Analysts’ Prediction for Q1 as Bank Releases $5.2 Billion Reserves for Bad Loans

By Adriaan Brits Wednesday, April 14, 2021

JP Morgan Chase reported higher-than-expected earnings for its Q1 after the banking company released $5.2 billion reserved for bad loans.

JP Morgan Chase and Co. sign.

Earnings Season Officially Start

JP Morgan reported a Q1 profit of $14.3 billion, which translates into $4.50 per share to top the $3.10 expected from the surveyed market analysts. The latter includes a $1.28 per share benefit from the reserve release, the banking company said in a statement.

Business revenue came in at $33.12 billion, comfortably above the $30.52 billion that Wall Street was calling for. The revenue beat was fueled by strong performance in the trading business sector, which generated $1.8 billion more in business revenues than analysts expected.

“In Consumer & Community Banking, consumer spending in our businesses has returned to pre-pandemic levels, up 14% versus the first quarter of 2019. We are also seeing good momentum in T&E with spend up more than 50% in March versus February,” Jamie Dimon, CEO of the company, said in a statement.

The banking company says that its credit business is operating in a challenging environment, similar to the Card business unit where “outstandings remain lower despite spend recovering to pre-COVID levels.”

Home Lending soared by 40%, with the digital shift further accelerated as almost 75% of consumer mortgage applications were completed online. Fixed-income trading business revenue came in at $5.8 billion to top Wall Street estimates by about 15%.

Given that equities trade at record highs, JP Morgan generated $3.3 billion from equities trading revenue to crush $2.3 billion expected from analysts.

“With all of the stimulus spending, potential infrastructure spending, continued Quantitative Easing, strong consumer and business balance sheets and euphoria around the potential end of the pandemic, we believe that the economy has the potential to have extremely robust, multi-year growth,” Dimon added.

Today’s earnings report and remarks from Dimon come just days after he released a 66-page long annual letter in which he addressed a wide range of topics. Among other things, he shared his vision regarding the work culture after the COVID-19 pandemic.

While Dimon voiced his bullishness on the US economic prospects after the pandemic, he believes US businesses should embrace remote work but also keep a close eye on potential risks the employment transition could pose in the long run.

“While working from home will become more permanent in American business, it needs to work for both the company and its clients,” JP Morgan CEO stressed.

The CEO of the largest US banking company by business revenues, which is the first major US company to report on Q1 earnings, mentioned a number of factors why employees will eventually return to offices, including jobs that are impossible to do from home.

Dimon’s vision involves “many employees” returning to the office full-time; “some employees” operating under a hybrid model that would allow them to work some days from home and others at a work location; and only “a small percentage of employees, maybe 10%, will possibly be working full-time from home for very specific roles,” he wrote in the letter.

Shares of JP Morgan are down by half a percent in pre-market trading Wednesday.

Summary

JP Morgan, a major banking company, reported better-than-expected earnings for Q1 on the back of a $5.2 billion benefit from releasing funds reserved for bad loans.

About the Author


Headshot for author Adriaan Brits
As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.

Related Articles