JPMorgan profit beats on higher interest rates; debt trading down

[January 12, 2018]   By Sweta Singh and David Henry

(Reuters) - JPMorgan Chase & Co <JPM.N>, the biggest U.S. bank by assets, reported a higher-than-expected quarterly profit on Friday as gains in net interest income offset a slowdown in trading revenue.

The bank recorded a $2.4 billion charge to cover a new one-time repatriation tax on income it has kept abroad and to adjust the value of its deferred tax assets and liabilities.

Wall Street analysts were expecting a $2 billion hit, based on comments the company made in December.

The sweeping changes in the tax law enacted by President Donald Trump are expected to mean short-term pain but long-term gain for large U.S. banks that do business worldwide.

"The enactment of tax reform in the fourth quarter is a significant positive outcome for the country. U.S. companies will be more competitive globally, which will ultimately benefit all Americans," Chief Executive Officer Jamie Dimon said in a statement.

Net profit, adjusted to exclude the tax charge and other one-time items, was $6.7 billion, or $1.76 per share, and beat the average estimate of $1.69 per share, as higher interest rates helped it earn more on its loans. (http://bit.ly/2AR7AUe)

Net revenue rose 4.6 percent to $25.45 billion and beat the estimate of $25.15 billion, despite a 27 percent fall in fixed income trading revenue, excluding the impact of the tax bill.

A sign of JP Morgan Chase Bank is seen in front of their headquarters tower in Manhattan, New York, U.S., November 13, 2017. REUTERS/Amr Alfiky

Trading revenue across the industry has been under pressure due to low volatility. Markets were especially active in the year-earlier quarter as investors changed positions around the U.S. election.

Equity trading revenue was flat, including the impact of a mark-to-market loss of $143 million on a margin loan to a single client. The loan is related to South African furniture retailer Steinhoff, according to a person familiar with the matter.

Rising interest rates, however, helped cushion the blow from lower trading revenue, lifting net interest income by 11 percent to $13.4 billion.

Net income, reported under generally accepted accounting principles (GAAP) and including the tax charge, fell to $4.23 billion, or $1.07 per share, in the fourth quarter ended Dec. 31, from $6.73 billion, or $1.71 per share, a year earlier.

JPMorgan's shares were little changed at $110.75 in light premarket trading.

(Reporting by Sweta Singh in Bengaluru and David Henry in New York; Editing by Saumyadeb Chakrabarty)

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