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JPMorgan falls on trading revenue slump, muted loan growth

JPMorgan Chase posted a decline in trading revenue that was steeper than analysts expected, and both commercial and consumer loans fell from a year earlier.

Shares of the company dropped after the firm reported a 16% slide in fixed-income trading revenue, worse than the 13.5% decline analysts had been expecting. Expenses rose 11% from a year earlier as compensation costs increased, and the firm said to expect costs to rise to about $77 billion this year.

"JPMorgan's results were surprisingly weak and were hampered by uncharacteristically poor expense management," Octavio Marenzi, chief executive officer of consultancy Opimas, said in an email. "The real surprise came in the 5% increase in non-interest expense, which looks difficult to justify," he said, referring to the jump from the third quarter.

The results offer a look at how the U.S. economy fared in the final three months of last year, including as the highly contagious omicron variant of Covid-19 took hold in December. JPMorgan's results also hint at what's to come when the rest of Wall Street reports fourth-quarter results later Friday and next week. 

Shares of JPMorgan dropped 2.8% to $163.59 at 7:32 a.m. in early trading in New York. 

Still, the company's dealmakers posted their best quarter ever on a booming merger-and-acquisition market, and Chief Executive Officer Jamie Dimon gave an upbeat assessment of prospects for growth.

"The economy continues to do quite well despite headwinds related to the omicron variant, inflation and supply-chain bottlenecks," Dimon said in a statement Friday. "Credit continues to be healthy with exceptionally low net charge-offs, and we remain optimistic on U.S. economic growth as business sentiment is upbeat and consumers are benefiting from job and wage growth."

The biggest U.S. bank also provided earnings guidance for 2022. It expects net interest income excluding the markets business to be $50 billion for the full year, higher than in 2021.

Total trading revenue fell 11%, more than the 9% drop analysts expected. While the fixed-income business was the biggest loser, equities revenue also declined, falling 2% to $1.95 billion.

M&A fees rose 86% in the fourth quarter, to $1.56 billion, higher than analysts' estimates, helping push the firm's net income to $10.4 billion, compared with expectations for $9 billion. 

The firm also reported 1% drops in both consumer and business loans from a year earlier. 

Dimon said earlier this week that "loan growth on the business side will probably return to normal," while consumer loan growth "will return to normal, it may just take another six or nine months."

Also in JPMorgan's results:

- Net interest income rose 3% in the quarter, bringing JPMorgan's total 2021 NII haul to $52.3 billion. The firm said in October that it expected to earn about $52.5 billion in net interest income in 2021.

- The firm reported a reserve release of $1.8 billion in the quarter, of which $1.3 billion fell to the bottom line.