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JPMorgan Profits Drop in Q4; Wells Fargo Sees Modest Improvement

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Kicking off the fourth-quarter earnings season, JPMorgan (JPM) reported a 6.6% drop in its fourth-quarter profits early Wednesday, tied to a 23% decline in fixed-income trading revenue and higher legal costs. Wells Fargo (WFC), though, said its quarterly earnings improved close to 2% in late 2014.

Rivals Bank of America (BAC) will report earnings Thursday, Goldman Sachs (GS) on Friday, and Morgan Stanley (MS) next Tuesday.

JPMorgan’s net income was $4.93 billion, or $1.19 a share, in Q4’14 vs. $5.28 billion, or $1.30, a year earlier. Excluding $990 million in legal expenses and other one-time charges, earnings per share were $1.33, which beat analysts’ estimates.

Net income for the year was a record $21.8 billion, on revenue of $97.9 billion, as legal costs shrank $8.2 billion from 2013. For the fourth quarter, revenue declined 2.3% from a year earlier to $23.6 billion.

The bank’s fixed-income trading sales were $2.5 billion during the period, when it sold its commodities unit and experienced lower revenue tied to credit and securitized products. Meanwhile, equity trading revenue rose 25% year over year to $1.1 billion on gains in the derivatives and prime-brokerage business, and net income at the corporate and investment bank rose 3% to $972 million.

JPMorgan retail bank branches have 3,090 financial advisors and 21,039 private bankers, according to its latest results.

Net new assets in the period for these advisors were $3.3 billion in Q4’14, down from $4.3 billion in the third quarter and $3.6 billion a year ago. Total client investment assets came to $213.5 billion, with 39% held in management accounts.

Wells Fargo

The San Francisco-based bank said expenses grew nearly 5% year over year in Q4’14 to $12.6 billion, affecting net income. Still, profits rose nearly 2% to $5.71 billion, or $1.02 a share, in the period, topping estimates.

Fourth-quarter revenue increased to $21.4 billion, though mortgage-banking revenue of $1.52 billion fell $118 million from the prior period; the bank reported $44 billion in home loans vs. $48 billion in the third quarter. The bank pointed to loan and deposit growth, as well as a continued strength in credit quality, for the overall sales improvement.

The bank’s Wealth, Brokerage and Retirement unit had net income of $514 million, down $36 million, or 7%, from third quarter of 2014, but up about 5% from $491 million in the year-ago period.

Revenue for the unit was $3.6 billion, though, up $94 million from the prior quarter and $209 million for Q4’13. The unit experienced “strong growth in asset-based fees and higher net interest income [which] were partially offset by lower gains on deferred compensation plan investments (offset in compensation expense) and lower brokerage transaction revenue,” the bank explained in a statement.

As for the retail brokerage, client assets ended the year at $1.4 trillion, up 4% from the prior year. Managed account assets totaled $423 billion, a year-over-year jump of 13%, “reflecting net flows and increased market valuations,” explains the company.

Also, the unit had solid loan growth, with average balances up 21% “largely due to growth in nonconforming mortgages and security-based lending.”

Wealth-management client assets stood at $225 billion as of Dec. 31, up 5% from the prior year. These operations also had loan growth improvement, with average balances up 10% year over year.

— Check out ThinkAdvisor’s 2014 Q4 Earnings Calendar for the Finance Sector.

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