For the first time in nearly four years, JPMorgan Chase, the biggest bank in the US, had bad news for investors today (Jan. 15): Fourth-quarter earnings missed analysts’ expectations, sending its shares sliding about 2% before they recovering later in the afternoon.
But the so-called bad news is relative: In the last three months of 2018, the bank still made over $7 billion—its best fourth quarter ever, and its fourth-best quarter of all time. Profits were up 67% from last year, and outstripped any result before last year. The bank reported a profit of $1.98 a share, short of analysts’ average estimate of $2.20 a share. It’s the first time since 2014 that JPMorgan neither met nor exceeded quarterly estimates.
So, what happened? Analysts are attributing the disappointing results to December’s turbulent markets, whipped up by ongoing political turmoil. Jamie Dimon, the bank’s chairman and CEO, echoed their concerns in a statement: ”As we head into 2019, we urge our country’s leaders to strike a collaborative, constructive tone, which would reinforce already-strong consumer and business sentiment. Businesses, government and communities need to work together to solve problems and help strengthen the economy for the benefit of everyone.”
The earnings miss seems to have been propelled by a decline in the bank’s capital markets operations, most notably in the bond market. Its market and investor services division, which includes stock, bond and commodity trading operations, reported revenue of $4 billion, some 11% less than a year earlier. In the same period, the bank’s consumer banking division was up 53% from last year, likely helped by last year’s rise in interest rates, with profits of around $4 billion.
Disappointing figures may not indicate the start of a trend, however. The bank’s chief financial officer, Marianne Lake, told reporters on a conference call the trading environment had improved by the start of the year after December’s volatility. “It is too early to call it, but a decent start to January,” she said.