Shares of JPMorgan fell sharply Friday, after the bank reported better-than-expected quarterly profit but the lowest rate in nearly two years while the lender’s chief financial officer cut guidance on company-wide returns.
The bank’s shares fell 5.3% during trading.
Higher-than-expected expenses pushed fourth-quarter profit down 14% to $10.4 billion, while revenue remained virtually unchanged at $30.35 billion. JPMorgan said in a statement that it received $1.8 billion net interest from freeing up reserves for unrealized loan losses; Without that 47% boost, earnings would be $2.86 per share.
Chief Financial Officer Jeremy Barnum told reporters on a conference call that management expects the “headwinds” of higher expenditures and the adjustment to Wall Street’s revenue will reduce the bank’s revenue in recent years. This means the bank is likely to miss its 17% target for return on capital, he said.
“Over the next year or two, we expect to make a modest profit below this target as headwinds are likely to outpace the tail winds,” Barnum said, adding that the target was still valid over the “medium term.”
Barnum added that JPMorgan will see expenditures rise by 8% to about $77 billion in 2022, driven by “inflationary pressures” and investments of $3.5 billion.
JPMorgan Chase announced its fourth-quarter earnings for 2021, which beat analysts’ expectations. The bank’s earnings amounted to $3.33 per share, which is higher than analysts’ expectations of $3.01 per share, according to analysis by the “Refinitiv” platform, while the bank’s revenues amounted to $30.35 billion, compared to estimates of $29.9 billion.
Government stimulus programs contributed to the recovery of consumer and business movement, which led to stagnant loan growth and prompted the Bank’s CEO to say that loan growth is facing challenges.
But analysts have pointed to a rebound in the fourth quarter driven by demand from companies and credit card borrowers, so they will want to see that reflected in JPMorgan’s results, since that, along with expected rate increases from the Federal Reserve, are Two main drivers for the recovery of banking sector profits.
It is noteworthy that shares of “JP Morgan” rose by 6.2% this year.
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