JPMorgan Chase, the Wall Street group, kicked off the bank reporting season by posting a near-fivefold increase in fourth-quarter profits to $3.28 billion (£2 billion), but acknowledged that its results “fell short” of the firm’s potential.
Barely a year after the US Government bailed out the financial institutions amid the worst economic crisis in decades, the global banking conglomerate reported full-year profits of $11.7 billion, or $2.26 a share, on record revenue of $108.6 billion.
As a result, its investment banking staff will receive an average of $328,000 in total pay for the year.
Jamie Dimon, the chairman and chief executive, said that the bank benefited from the diversity of its business and the continued earning strength of its investment bank and asset management operations.
But he said that his outlook remained cautious as consumer credit costs remain high and weak employment and home prices persisted.
Advertisement
“Though these results showed improvement, we acknowledge that they fell short of both an adequate return on capital and the firm’s earnings potential,” he said.
Mr Dimon’s notes of caution come as analysts predict soaring bonuses and compensation for top banks in the present reporting season and follow only a day after the Obama Administration announced a new levy on banks and financial institutions that seeks to raise $90 billion from the 50 biggest groups in the sector over ten years.
The new levy is designed to help to recoup taxpayer money used to bail out banks and other corporations at the height of the financial crisis.
Mr Dimon said that the bank would be paying more of its staff bonuses in shares. The stock component of the 2009 payouts would be “a little bit higher”, he told analysts.
It set aside $9.3 billion for compensation and benefits for investment-bank employees in 2009, enough to pay each worker in the division $378,600.
Advertisement
The reserve is 33 per cent of the investment bank’s revenue for the year, compared with 62 per cent in 2008, the lowest proportion allocated for pay since JPMorgan merged with Bank One in 2004.
JPMorgan Chase made a profit of $3.28 billion in the fourth quarter on sales of $25.23 billion, thanks in part to the strong return from the investment bank. In the same period last year it made $702 million profit.
Although the bank’s Wall Street operations performed well, its high street businesses were weak.
INvestment bank profits amounted to $1.9 billion for the quarter after a loss of $4.3 billion in the same period the previous year.
The turnaround was on the back of increases in equity underwriting fees (up 66 per cent), debt underwriting fees (up 58 per cent) and investment banking fees (up 38 per cent).
Advertisement
There was also a good performance in the asset management business, where profits rose by 66 per cent to $424 million.
Elsewhere, retail financial services reported a net loss of $300 million for the quarter, compared with a net gain of $624 million a year earlier, because of weaknesses in its consumer lending business.
Card services also reported a loss but, at $306 million, it was an improvement on the figure of $371 million last year.
Treasury and securities services reported a 56 per cent fall in net income to $237 million.
In the corporate/private equity division, profit was $1.2 billion, compared with $1.5 billion a year earlier.
Advertisement
Mr Dimon said, “While we are seeing some stability in delinquencies, consumer-credit costs remain high, and weak employment and home prices persist. Accordingly, we remain cautious.”
He added $2 billion to the reserve for future loan losses, virtually the same amount as in the third quarter.
The bank, which received $25 billion in financial support from the US Government, and repaid the money last June, did not report a single quarterly loss throughout the worst of the financial crisis.
Shares fell 1.32 per cent to $44.10 on the market opening.