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JPMorgan Beats Q4 Earnings On Reserve Release, Soaring M&A Fees: Stock Slides

"Unprecedented M&A activity", as well as the release of $1.8 billion in provisions set aside for bad loans, helped JPMorgan top the Street's Q4 earnings forecast.

Updated at 12:30 pm EST

JPMorgan Chase  (JPM) - Get JPMorgan Chase & Co. Report posted stronger-than-expected fourth quarter earnings Friday, thanks in part to solid gains from investment banking fees and the release of reserves set aside during the peak of the Covid pandemic.  

JPMorgan said earnings for the three months ending in December were pegged at $10.4 billion, or $3.33 per share, down 12.1% from the same period last year but well ahead of the Street consensus forecast of $3.01 per share. Removing the benefit of a $1.8 reserve release, as well as other one-off items, JPMorgan's first quarter profit was $2.86 per share.

Managed revenues, JPMorgan said, were essentially flat to last year at $30.3 billion, just ahead of analysts' estimates of a $29.9 billion tally, while net interest income rose 3% to $13.7 billion.  Investment banking revenues rose 28% to $3.2 billion, JPMorgan said, markets and securities trading revenues fell 13% to $6.3 billion.

Looking into the coming year, the country's biggest bank said net interest income, a key measure of profitability, coming in at around $50 billion, down from the 2021 tally of around $52.5 billion and well shy of Street forecasts.

"The economy continues to do quite well despite headwinds related to the Omicron variant, inflation and supply chain bottlenecks," said CEO Jamie Dimon. "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."

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“Global IB fees were up 37%, driven by both the Corporate & Investment Bank and Commercial Banking, due to unprecedented M&A activity, an active acquisition financing market and strong performance in IPOs," he added. "Markets revenue was down 11%, compared to a record fourth quarter last year, but up 7% versus the 2019 quarter driven by a strong performance in Equities."

JPMorgan shares were marked 5.8% lower in mid-day trading following the earnings release to change hands at $155.56 each

Global merger deals topped $5 trillion for the first time on record this year, an all-time high powered in part by SPAC deals, cheap capital and major corporate restructurings.

Dealogic, which compiles merger and acquisition data, said the value of global deals rose 63% from last year to $5.63 trillion, a fresh all-time high that eclipsed the 2007 record of $4.42 trillion.

Plans unveiled by General Electric  (GE) - Get General Electric Company Report and Johnson & Johnson JNJ to split-up their companies played a big role in this year's record total, as did the surge in deals made with so-called special purpose acquisition companies, or SPACs, lead by Singapore-based Grab's $4.5 billion merger earlier this month.