Citadel Advisors Lowers Position in JPMorgan Chase



Citadel Advisors and JPMorgan Chase

During 4Q14, Citadel Advisors lowered its position in JPMorgan Chase (JPM). Citadel held 2,833,835 shares of JPM, down from 6,585,291 shares in 3Q14.

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Overview of JPMorgan Chase

JPMorgan Chase is a leading global financial services firm. The company has $2.5 trillion in assets and operations worldwide. It provides services in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, and asset management. JP Morgan operates in four segments:

  • Consumer and Community Banking (or CCB)
  • Corporate and Investment Banking (or CIB)
  • Commercial Banking (or CB)
  • Asset Management (or AM)

CCB is the largest segment, contributing 46% of the total revenue in 2014, followed by CIB with 34% of contributions.

JPM is one of the “big four” banks in the US. The other banks are Bank of America (BAC), Citibank (C), and Wells Fargo (WFC). All of the banks are a part of the Financial Select Sector SPDR ETF (XLF). JPX also accounts for 9.97% of the iShares Dow Jones US Financial Service ETF (IYG).

Job cuts at JPM

As per a Bloomberg report from February 24, JPM is planning to close about 300 branches by the end of 2016, or ~5% of the total branches. This initiative has been taken under a cost reduction program in consumer business. Consumer banking is noticing a shift in technology, as many consumers use smartphone apps for banking transactions. In 2014, mobile banking transactions at JPM grew 20% to 19 million.

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Since 2012, consumer business has cut its expenses by $3.2 billion and expects to reduce an additional $2 billion by 2017. On March 20, Fox Business Network’s senior correspondent, Charlie Gasparino, tweeted that JPM is expected to cut jobs in investment and commercial banking units. This job cut would represent 5% to 7% of total workforce. In addition, JPM reduced 11% of its branch employees in 2013 and 2014.

JPM declares 4Q14 results

JPMorgan declared earnings per share (or EPS) of $1.19 against the analysts’ estimate of $1.30 per share. In 2014, JPM missed earnings expectations in three out of the four quarters. The higher capital requirement reduced overall profitability. For 4Q14, revenue was $23.6 billion, 2% down year-over-year. Net income was $4.9 billion compared to $5.3 billion in 4Q13.

As JPM fell short of analysts’ estimates, its stock fell by nearly 3.5% on the day of the earnings release.

Increase in dividends and new buyback program

In the fourth quarter, JPM used ~$3 billion from its earnings as dividends for shareholders. On March 17, it declared a quarterly dividend of $0.40, which was in line with previous estimates. The company announced plans to increase its dividend to $0.44 per share. It has also announced a share buyback program of $6.4 billion.

In the next part of the series, we’ll discuss Citadel’s position change in Halliburton Company (HAL).


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