Profits rise at JPMorgan Chase and Citigroup but slump at Wells Fargo

JPMorgan Chase published its highest ever annual profit for last year while Citigroup beat analysts' estimates for fourth-quarter profit as the reporting season began in earnest for US banks.

However, Wells Fargo’s profit slumped 55 per cent in the fourth quarter as new boss Charles Scharf set aside another $1.5 billion (€1.35 billion) for legal costs related to the bank’s sales scandal and promised “fundamental changes”.

JP Morgan, America’s largest bank by assets, reported net income of $36.4 billion for 2019, up 12 per cent year on year, after making $8.5 billion in the fourth quarter, far better than the $7.45 billion expected by analysts who submitted forecasts to Bloomberg.

Revenues for the quarter came in at $29.2 billion on a managed basis, up 9 per cent year on year.

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Trading revenues rose 56 per cent year on year to $5 billion, led by an 86 per cent rise in fixed income trading revenues, rebounding from a grim performance in the fourth quarter of 2018.

JPMorgan’s finance boss Jenn Piepszak had said markets revenues would be “meaningfully up”. Investment banking revenue rose marginally, to $1.8 billion, year-on-year.

In the retail bank, the Chase franchise enjoyed a 5 per cent rise in deposits in the quarter, while credit card sales were up 10 per cent year on year, and balances rose over the holiday season.

"The US consumer continues to be in a strong position and we see the benefits of this across our consumer businesses," chief executive Jamie Dimon said. JPMorgan's commercial bank also made record revenues for the year.

At Citigroup, North American branded cards, which account for a majority of the bank’s consumer banking revenue, clocked double-digit revenue growth for the second straight quarter, rising 10 per cent from a year earlier.

The third-largest US bank by assets has been leveraging its robust card business to help grow deposits by pitching checking and savings accounts to card holders.

Cost cuts

Trading revenue rose nearly 31 per cent as markets steadied during the final three months of 2019, with the gains driven by a 49 per cent surge in fixed-income trading. Equities trading fell 23 per cent due to weak performance in derivatives.

Wells Fargo, meanwhile, racked up operational losses of $1.9 billion in the final quarter of the year as it set aside more cash to deal with pending litigation related to its fake-account scandal that erupted more than three years ago.

The fourth-largest US lender by assets, has leaned on cost cuts to stabilise its bottom line amid sluggish revenue growth and a raft of fines and costs relating to illegal sales practices first uncovered in 2016.

Total non-interest expense jumped 17 per cent, due to the litigation costs and higher costs related to salaries and employee benefits.

Mr Scharf said the bank’s cost structure was simply too high, while also recommitting to beef up its approach to regulation.

“During my first three months at Wells Fargo my primary focus has been on advancing our required regulatory work with a different sense of urgency and resolve,” he said in a statement.

Wells Fargo shares fell about 3.3 per cent following the results announcement. – The Financial Times and Reuters