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JPMorgan Chase’s Q4 Miss Could Impact Its Stock

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Jan. 15 2019, Updated 9:30 a.m. ET

Weaker fourth-quarter results

On January 15, JPMorgan Chase (JPM) reported weaker-than-expected fourth-quarter results. The revenues rose ~4% on a YoY (year-over-year) basis due to the higher net interest income. However, the revenues fell marginally short of analysts’ estimate, which reflected lower fixed-income revenues. Lower fixed-income revenues also remained a drag on Citigroup’s (C) fourth-quarter financials due to challenging market conditions. Citigroup reported mixed fourth-quarter results on January 14.

Lower fixed-income revenues and higher-than-expected provisions for credit losses weighed on the bottom line in the fourth quarter. The bottom line missed analysts’ estimate.

We expect market-sensitive products to remain a drag on banks’ (XLF) financials. Wells Fargo (WFC), which also reported its fourth-quarter results on January 15, missed analysts’ sales estimate due to lower market-sensitive revenues. The YoY decline in loans and deposits remained a drag.

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Key numbers

JPMorgan Chase reported total revenues of $26.8 billion, which increased ~4% on a YoY basis but remained marginally shy of analysts’ estimate. The higher net interest income, which reflects growth in loans and higher rates, supported the top-line growth rate. However, a 16% decline in fixed-income revenues remained a drag.

JPMorgan Chase also increased the provisions for credit losses by $240 million to $1.5 billion, which didn’t sit well with investors. The bank posted an EPS of $1.98, which rose on a YoY basis due to lower taxes and share buybacks. However, higher provisions and lower fixed-income revenues had a negative impact on the growth rate. Analysts expected JPMorgan Chase to report an EPS of $2.20 in the fourth quarter. With the earnings miss, JPMorgan Chase broke its long streak of beating analysts’ estimates. JPMorgan Chase stock was trading 2.5% down in the pre-market session.

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