JPMorgan Chase & Co. (NYSE: JPM) in the fourth quarter of FY 17 has posted better than expected results as the company took a $2.4 billion charge due to the Tax Cuts and Jobs Act. The analysts were expecting a $2 billion hit, based on comments the company made in December. Further, there were gains in net interest income, which had offset a slowdown in trading revenue. Rising interest rates has boosted the net interest income by 11 percent to $13.4 billion. Overall in the fourth quarter, the net income fell 37% to $4.2 billion. However, excluding the impact of the Tax Cuts and Jobs Act, the net income would have been $6.7 billion, which is a fall of 1%.
Meanwhile, the analysts are expecting that the financial sector will get benefit from the Republican tax overhaul, which President Donald Trump had signed into law last month. The plan had lowered the corporate tax rate to 21 percent from 35 percent. JPM expects its FY 18 effective tax rate to be around 19 percent.
JPMorgan Chase in the fourth quarter of FY 17 has reported the adjusted earnings per share of $1.76, beating the analysts’ estimates for the adjusted earnings per share of $1.69 according to Thomson Reuters. The company had reported the adjusted revenue growth of 4.6 percent to $25.45 billion in the fourth quarter of FY 17, beating the analysts’ estimates for revenue of $25.15 billion. This is despite a 27 percent fall in fixed income trading revenue, excluding the impact of the tax bill.
Moreover, in the fourth quarter, trading revenue across the industry has been under pressure due to low volatility. JPM’s fixed income markets revenue fell 34 percent year-over-year due to the continued low volatility and tighter credit spreads. The company’s equity markets revenue was flat compared to the previous year. This included the impact of a mark-to-market loss of $143 million on a margin loan to a single client. The loan is related to South African furniture retailer Steinhoff, as per the person familiar with the matter. Markets were especially active in the year-earlier quarter as investors changed positions around the U.S. election.
Additionally, during the fourth quarter, JPM has returned $6.7 billion in capital to shareholders with $4.7 billion in net stock buybacks.
JPM stock has risen 0.9% leading to a total rise of over 16.5% in the last three months (source: Google Finance).