JPMorgan Chase & Company’s (JPM) 4th quarter earnings came in at 74 cents per share, substantially ahead of the Zacks Consensus Estimate of 61 cents. This also compares favorably with earnings of 6 cents in the prior-year quarter.
Better-than-expected results of JPMorgan were primarily aided by continued strong performance of the company’s Investment Bank. All other segments except Consumer Lending and Card Services also delivered solid results during the quarter. However, high levels of consumer credit costs and increased provisions for credit losses were primary factors, which negatively impacted results.
Net income available to common shareholders was $3.3 billion, compared to $3.6 billion in the prior quarter and $702 million in the prior-year quarter. The year-over-year increase was driven by higher net revenue, largely offset by higher provision for credit losses and non-interest expense.
For full year 2009, JPMorgan’s net income came in at $11.7 billion or $2.26 per share, more than double that of $5.6 billion or $1.35 per share in 2008.
Managed net revenue for the quarter came in at $25.2 billion, up 32% from $19.1 billion in the year-ago quarter.
Managed non-interest revenue was $10.8 billion, up $7.6 billion from the prior-year quarter. The increase was driven by higher principal transactions revenues as well as higher investment banking fees. Net interest income was $14.4 billion, down 9% year-over-year. The decline in net interest income was due to JPMorgan’s lower trading-related net interest income, lower loan balances and spread compression on liability and deposit products.
Non-interest expense for the quarter was $12.0 billion, up 7% from the prior-year quarter. The increase was driven by higher performance-based compensation, servicing and defaulted-related expense and FDIC insurance premiums, partially offset by lower headcount-related expense and efficiencies resulting from the Washington Mutual transaction.
The managed provision for credit losses increased 4% year-over-year to $8.9 billion. The total consumer-managed provision for credit losses was $8.5 billion, compared to $7.4 billion in the year-ago quarter, reflecting higher net charge-offs, partially offset by a lower addition to the allowance for credit losses primarily relating to Card Services.
JPMorgan’s credit quality slightly improved during the quarter. As of Dec. 31, 2009, nonperforming assets decreased 3% sequentially to $19.7 billion. Managed loan charge-offs decreased 3% sequentially to $7.8 billion As a result, the managed charge-off rate deteriorated 1 basis point sequentially to 4.29%.
JPMorgan maintained a strong balance sheet with Tier 1 Common Capital of $133.0 billion. The Tier 1 Common Capital ratio was 8.8% at Dec. 31, 2009 (estimated), versus 8.2% at Sep 30, 2009 and 7.0% at Dec. 31, 2008.
Book value per share of common stock was $39.88 as on Dec 31, 2009, compared with $39.12 as on Sep 30, 2009 and $36.15 as on Dec 31, 2008.
We anticipate continued synergies from JPMorgan’s diversification and strong capital position, but increasing provisions and rising consumer credit costs will be a drag on upcoming results. However, we are impressed to see some improvement in credit quality during the reported quarter.
Since the announcement of results, the shares of JPMorgan have fallen 2.3%.
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