JPM Earnings Rebound On Big Drop In Compensation Expense; Dimon Notes "Some Stress In Energy"
There were four things we mostly cared about in today's JPM earnings release, the first Wall Street bank to report Q4 results:
- how did the company's fixed income and equity trading revenue do;
- what is the bank's credit exposure to energy/oil;
- did the recent Fed hike do anything to boost the company's Net Interest Margin (this has been the primary catalyst for bank share upside), and
- did JPM halt its practice of releasing reserves and start building reserves - a major inflection point when it comes to management expectations for future credit quality deterioration.
But before we go there, here is a quick skim of the summary income statement: as the table below shows, JPM posted a modest $0.13 increase to EPS Y/Y which rose to $1.32, beating estimates of $1.27 driven by a $1.1BN reduction in expenses while revenue increased only $0.2BN from a year ago. One place where the cost-cutting may have come from is headcount as JPM lost 12,000 workers in 2015 and has lost ~43,000 since 2012. However, the biggest hit was in Investment Banking compensation (as in bonus accruals) which dropped by $1.1BN Y/Y to $4.4BN, also down $1.7 billion from the prior quarter. It will not be a happy year for JPM bonus recipients.
Then a quick look at JPM's balance sheet which has continued its recent trend of declining, and was down to $2.352 trillion, down $221 billion from a year ago, while the matching decline on the liability side was once again in deposits which dropped to $1.28 trillion from $1.363 trillion a year ago, while non-operating deposits decline by $200 billion. And while JPM no longer discloses the full breakdown of its Net Interest Margin, it did note that "Firm NII up $310mm QoQ and NIM up 7bps QoQ to 2.23%", adding to "Expect 1Q16 Firmwide NII and NIM to be flat to slightly up sequentially." One would sure hope it is up instead of flat: after all that was the whole point of the Fed rate hike right.
Drilling down on just JPM's income statement, we focus on the most important group, Corporate and Investment bank, where total revenue slumbped by $314MM Y/Y to $7.1 billion mostly as a resulyt of a decline in IB revenue, which at $1.5B, was down 11% YoY "driven by lower debt underwriting fees, partially offset by higher advisory fees." In other words, JPM does not do too well when there is a debt issuance drought.
Then we focus on what until recently was every bank's favorite non-GAAP accounting piggybank: releases from loan loss reserves. Here something changed, because after years of declining loan loss reserves, in Q4, for the first time in many consecutive quarters, JPM increased in loan reserve by $89 million to $13.555 billion.
What drove this increase in reserves? As JPM notes in the earnings presentation, "Credit costs of $81mm primarily reflecting higher reserves driven by Oil & Gas" within the IB group and a "reserve build of ~$100mm driven by $60mm in Oil & Gas and $26mm in Metals & Mining" within the commercial banking group.
The first oil and energy cracks are indeed starting to emerge, further confirmed by Jamie Dimon who said that while JPM had a good quarter as 2015 came to a close, "businesses generated strong loan growth and credit quality, except for some stress in energy." How much stress, exactly, won't be revealed for a few more months.
Until then, we will keep our eye on the other big banks and see if anyone else will crack first and admit just how big their exposure to the foundering oil and energy sector truly is.
The full Q4 JPM presentation is below
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As long as the TBTF banks are grossly profitable, all is well in the world.
/sarc
<Sleep tight tonight, JPM is rolling in the dough.>
JPM will be vulturizingi.e. repossesssing assets from BK energy companies, and racking up revenue underwriting Chapter 11s for them in 2-3 months. Rosy future for Jamie.
https://www.facebook.com/JAGACE2012/videos/10151662553063932/?pnref=story
9-11 Here's something the government didn't want you to see.
It is the confiscated footage from the convinience store across from the Pentagon on 911...
The FBI confiscated the footage that day. It took 10 years to be released.
No impact footage .... what prompted a video .... of a rather generic shot of a freeway .... perhaps, a jet flying by at low altitude .... Monedean/Boolean Logic ?
Another click into bullshit. There must be some duummmb asses out there to believe any of that Youtube crap. And save it unless you can come up with some original flamage.
My last month paycheck was for 11000 dollars... All i did was simple online work from comfort at home for 3-4 hours/day that I got from this agency I discovered over the internet and they paid me for it 95 bucks every hour...Try it yourself... www.wallstreet34.com
Last month .... you donated how much .... to ZH .... for publicity .... big "Diamond Jim" spender ?
it ends with bail-ins
edit: as you may or may not know - there is only 30 days left before australia "celebrates" our 50 year anniversary of decimilisation (you may have seen the adds from the perth mint of such 1c and 2c coins on ths fine site). however I have been working on a song to mark the occasion. I hope you will like it when the time comes. being about banks, it will of course end with the topic of bail ins.
i hopefully dont flake on my new years resolution to get the half a dozen austrian economic based songs rattling around (unlike other new years resolution - stop wanking - fail 2nd january - amiright fellas)
now to channel my inner rolf harris (pre-scandal)
hopefully tylers will post else forgive the youtube link spam on the day.
Nope, nothing unusual about those numbers.
As the poop hits the fan, these early morning PM smackdowns are going to look more and more ridiculous and become less and less believable.
...except for some stress in energy...
Dimon bought another 3 months before the shit hits the fan.
Keep on buying Yellen you fucking cunt!!!
Mark to fantasy mode engaged, sir.
JP Morgan is a "primary dealer" for the US Federal Reserve. The Fed still buys their toxic assets and gives them cash for it. The cash is basically free money for them to invest in stocks and give loans to corporations to do stock buybacks.
I'm highly skeptical of the numbers JPM reports. What are their GAAP earnings?
a paltry $89M build after stealing how many billions in bonus bucks?
The economy is STWRONG!
Jamie Dimon = Diamond Jim
JD = Slippin' Jimmy
Apparently the Fed is still doing QE..
http://www.marketwatch.com/story/this-chart-shows-the-feds-balance-sheet...
talmudic rule
Jamie, something is on the roof will you help us check it out.