JPMorgan Slips Despite 4th-Quarter Revenue and Earnings Beat

James Li

Bank sets approximately $2.9 billion in net reserve releases

Shares of JPMorgan Chase & Co. (NYSE:JPM) slipped approximately 2% on Friday following the release of its fourth-quarter 2020 earnings results.

For the quarter, the New York-based bank reported net income of $12.14 billion, or $3.79 in earnings per share, compared with net income of $8.52 billion, or $2.57 in earnings per share, for the fourth quarter of 2019.

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Bank reports strong revenues even after excluding net reserve releases

JPMorgan Chase Chairman and CEO Jamie Dimon said that the bank concluded a “challenging” year with record revenues driven by the bank’s “diversified business model and dedicated employees.” The bank reported record income despite setting aside $2.9 billion in net reserve releases. Adjusted net earnings of $3.07 per share, which excludes the 72-cent boost in reserve releases, outperformed the Refinitiv consensus estimate of $2.62 per share.

Dimon added that while the reserve releases resulted from “positive [coronavirus] vaccine and stimulus developments,” the reserve calculations stem from “multiple, multiyear hypothetical probability-adjusted scenarios” that can introduce quarterly volatility in revenues. The CEO added that JPMorgan’s credit reserves of over $30 billion “continue to reflect significant near-term economic uncertainty.”

Stock falls on down day for U.S. markets

Shares of JPMorgan Chase hit an intraday low of $137.01, down approximately 2.9% from the previous close of $141.12. Despite this, the stock is fairly valued based on a price-to-GF Value ratio of 1.02.

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According to GuruFocus, JPMorgan’s equity-to-asset and debt-to-equity ratios are underperforming over 64% of global competitors, suggesting moderately high use of financial leverage.

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The Dow Jones Industrial Average hit an intraday low of 30,612.17, down 378.85 points from Thursday’s close of 30,991.52 as investors monitored news regarding President-elect Joe Biden’s new coronavirus stimulus plan and accelerating coronavirus cases and casualties around the globe.

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See also

Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) discarded over 95% of its JPMorgan Chase holding during the September 2020 quarter, leaving just 967,267 shares. However, Berkshire’s fourth-quarter 2020 portfolio has not come out yet since the deadline is 45 days after the quarter ends.

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Disclosure: No positions.

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About the author:

James Li

I am an editorial researcher at GuruFocus. I have a Master’s in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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