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On Tuesday before the US market opened, JP Morgan released their Q4 and Full-Year (FY) results. Due to lower trading volumes in this quarter, the company missed analyst expectations for both revenue and net income. Going into the results knowing that the company had 'disappointed', I was expecting to read weak numbers. What I found was the total opposite.
For the FY the company had revenues of $111 billion, up 7%, and net income of $32 billion, both figures record highs for JP Morgan. For me it was a good reminder to not focus on what analysts expect. As Paul said in the office on Tuesday, it is not the company missing expectations, it is the analysts giving the wrong forecast.
In Q4 JP Morgan's trading revenue was down 18%. The trading division helps connect buyers and sellers, in particular for bonds, but also in commodities, currencies and equities. For connecting the buyers and sellers, the JP Morgan trading desk takes a small fee. Generally when there is market volatility trading volumes increase, which is what analysts were expecting. But in the most recent market slide, things were too volatile and resulted in investors doing less instead of more. Trading is a volatile but high margin revenue stream, so an 18% drop in revenues is nothing to be concerned about. Next quarter we could see a complete 180, and revenues soar higher.
Wall Street and the banks, are painted as these greed driven, money-making machines. With all the scandals to hit Wall Street, their reputation is understandable. That is not always the case though. While going through the Q4 numbers I was pleasantly surprised to see that JP Morgan gave $200 million to the JPMorgan Chase Foundation, where the focus is on reducing inequality through the focus on Jobs & Skills, Small Business Expansion, Financial Health, and Neighbourhood Revitalisation. You can read more about what the money is used for here - Global Philanthropy
All in all, JP Morgan is still on track to continue growing with the US economy and to pay out a generous dividend.