This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bank Stocks and the Secret of NIM (Update 2)

According to data supplied by Thomson Reuters Bank Insight, the company's net interest margin narrowed to 2.37% in the fourth quarter from 2.40% in the third quarter, but JPMorgan Chase reported that its core net interest income -- excluding the effect of hedging derivatives and adjusted for taxes -- increased to $9.812 billion in the fourth quarter, from $9.790 billion the previous quarter.

During the fourth quarter, the company's average deposits grew by 3% sequentially to $1.134 trillion billion, while average total loans grew only slightly to $725.6 billion, and the average rate on loans during the fourth quarter was 4.83%, declining from 4.98% the previous quarter. Meanwhile, the average rate the company paid on interest-bearing liabilities was 0.64%, declining by only five basis points from the third quarter.

One fourth-quarter highlight for JPMorgan was that its average non-interest bearing deposits grew by 5.5% sequentially to $374.893 billion during the fourth quarter.

JPMorgan was able to grow its core net interest income, despite the declining margin, because the company's strong deposit growth allowed it to grow its core average interest-earning assets by 3% sequentially to $1.371 trillion during the fourth quarter. The company also saw strong growth within its Commercial Banking segment, where average total loans grew by 3% during the fourth quarter, to $128.2 billion, as of Dec. 31.

Following the company's earnings announcement on Jan. 16, Oppenheimer analyst Chris Kotowski said that JPMorgan Chase's fourth-quarter increase in net interest income indicated "that ongoing NIM pressure from low rates can be offset by loan growth." Kotowski rates JPMorgan "Outperform," with a 12 to 18 month price target of $62, implying 33% upside over Tuesday's closing price of $46.54.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
4 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,079.57 -42.44 -0.25%
S&P 500 1,996.74 -3.38 -0.17%
NASDAQ 4,557.6950 -11.9260 -0.26%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs