Following a difficult 2013, which saw the company adding thousands of staff members to handle an increasing regulatory compliance burden, as well as a major hit to earnings from $17.5 billion in fourth-quarter residential mortgage-backed securities settlements with government authorities, investors are hoping for a return to form for the nation's biggest bank.
JPMorgan earned $17.923 billion, or $4.35 a share during 2013, down from a record $21.284 billion during 2012. And in 2012, the company's earnings were lowered by over $6.2 billion, before tax, from losses related to the "London Whale" hedge trading debacle. The company projects that over the next four to five years, in a normalizing interest environment, its annual core earnings should rise from $23 billion in 2013 to roughly $27 billion.
The company's return on average tangible common equity during 2013 was 11.92%, down from 14.72% in 2012 and 15.26% in 2011.
The ROTCE numbers for the previous two years were impressive, but JPMorgan, even if 2014 turns out to be relatively "normal," with much less in the way of legal and regulatory pain, will have a difficult time pushing its ROTCE over 15%. This is because the company continues to build capital, in light of the Basel III requirement as a global systemically important financial institution (SIFI), with even more stringent requirements from U.S. regulators. But the company's goal is for ROTCE to rise to a range from 15% to 16% over the next four years.