JPMorgan misses estimates, caused by trading troubles

NEW YORK – JPMorgan Chase & Co.’s fourth-quarter profits badly missed analysts’ forecasts on Tuesday, caused by weakness in the bank’s bond-trading business.

The nation’s largest bank said it earned $7.07 billion in the last three months of the year, or $1.98 per share, up from $4.23 billion, or $1.07 a share, in the same period a year earlier.

Last year’s results were impacted by the passage of the Republicans’ tax law, which caused many big banks to make accounting adjustments and write off billions of dollars in what are known as tax-deferred assets.

So while JPMorgan’s profits were up 67 per cent from a year earlier, they still missed Wall Street’s expectations. Analysts surveyed by FactSet were looking for JPMorgan to earn $2.20 a share.

The turmoil that whipsawed the markets in December weighed heavily on JPMorgan’s results. While banks do like some volatility because it allows their traders to look for opportunities in markets, the movements in recent months were too nauseating even for Wall Street traders.

JPMorgan’s market and investor services division, which includes its stock, bond and commodity trading operations, reported revenue of $4 billion, down 11 per cent from a year earlier. Bond trading revenue fell 18 per cent on an adjusted basis.

The bank’s consumer banking division had a much better quarter than its investment bank, helped by last year’s rise in interest rates. Higher rates allow banks to earn more from lending. Profits in the division were $4.03 billion, up 53 per cent from a year earlier.

Despite the difficulties in bank’s trading, JPMorgan’s Chief Executive Officer Jamie Dimon said in a statement that the U.S. economy is benefiting from “a healthy and engaged U.S. consumer that is spending, saving and investing.”

Asked by journalists about the current government shutdown, Dimon said a lengthy shutdown “is not going to help the economy.” He said the closure could send U.S. economic growth to a standstill in the first quarter if allowed to continue.

The bank said its return on tangible on common equity, a measurement of how well a bank is performing, was 14 per cent in the quarter. JPMorgan and other big banks typically want return on equity to be above 10 per cent.

JPMorgan shares fell 0.9 per cent in late-morning trading to $100.02. The bank’s stock is up 2.5 per cent so far this year.