JPMorgan Chase Ends Whale of a Year With Record $21.3 Billion in Profit

Updated with additional information throughout.

  • JPMorgan Chase reports fourth-quarter profit of $5.7 billion or $1.39 a share. Analysts expected $1.16 a share, according to consensus estimates available at Thomson Reuters
  • Net revenue came in at $24.4 billion, in line with estimates.
  • Bank reported profit of $21.3 billion in 2012, on revenues of $99.9 billion.
  • CEO Dimon pay cut in half to $11.5 million on London Whale debacle

NEW YORK ( TheStreet) - JPMorgan Chase ( JPM) said fourth quarter profit rose 53% on strong mortgage banking revenues, lower credit costs and higher overall lending.

The New York -based bank reported net income for the fourth quarter of $5.7 billion or $1.39 per share, compared to $3.7 billion or 90 cents per share in the year-ago quarter. The results included a number of one-off items including a $900 million pretax expense related to a recent foreclosure settlement, but they largely offset each other.

Revenue for the fourth quarter was $24.4 billion, up 10% year on year. Analysts expected $1.16 per share on revenues of $24.4 billion. The beat appears to have come mostly from lower provisions for loan losses, according to analyst reports.

The bank finished 2012 with $21.3 billion in profits, despite the trading fiasco at its chief investment office in London that resulted in over $6 billion in losses.

The debacle hurt the bank's reputation and cost CEO Jamie Dimon heavily. Dimon's pay for 2012 was cut in half to $11.5 million, according to a filing with the SEC.

Still, Dimon touted the bank's record profits and return on tangible equity of 15% and cited improving credit metrics.

"We continued to see favorable credit conditions across our wholesale loan portfolios and strong credit performance in our credit card portfolio, where charge-off rates remain at historic lows," Dimon said in a statement. "The real estate portfolios, while at elevated levels of losses, continued to show improvement as the housing market and economy continued to recover. As a result, we reduced the related allowance for credit losses by $700 million in the fourth quarter and we are likely to continue to see reductions in the allowance as the environment improves."

Trading revenues fell 15% quarter-on-quarter, as hurricane Sandy and uncertainty over the fiscal cliff took its toll on market activity, in line with company's guidance.

Compensation at the investment bank fell 6% to $2.2 billion. Compensation as a percentage of revenue for the year fell to 33% from 34% in 2011.

Mortgage banking continued to be a source of strength, with originations rising by 33% to $51.3 billion.

The bank released reserves of $700 million as credit quality continued to improve on the back of an improvement in housing.

Separately, JPMorgan released the results of an internal probe into the losses at its CIO office.

The report blamed management including Chief Investment Officer Ina Drew and former CFO Doug Braunstein for the lapse in risk management, but were relatively easy on Dimon, citing steps taken by the CEO since the loss was discovered.

In a media conference call, Dimon said he respected the board's decision to cut his pay in light of the "huge, embarassing mistake".

Reacting to the pay cut, NYC Comptroller John Liu, said, "It sends the right message - that executives at the highest level will be held financially accountable for conduct that harms the company.We're heartened that JPMorgan understands the need to align the interests of its executives with those of its long-term shareowners, and we will continue to press for reforms that will prevent future reckless risk-taking."

Dimon said in the media call that the CIO losses were close to being a non-issue for shareholders, though investigations on the matter were still pending.

Earlier this week, the Federal Reserve and the OCC ordered the bank to enhance its risk management system after an investigation into the trading losses found deficiencies in the bank's risk controls.

--Written by Shanthi Bharatwaj in New York

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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