JPMorgan’s Quarterly Tax Pain Should Lead to 2018 Gains

Citigroup Inc. has said it will face a hit of as much as $20 billion, largely from a writedown of deferred tax assets, and other U.S. banks have  disclosed one-time charges in the billions.

The tax changes affected the firm’s trading results as revenue fell 26 percent to $3.37 billion from a year earlier.

Fixed-income revenue dropped 34 percent to $2.22 billion — more than $500 million lower than analysts’ estimates for that business — fueled by placid markets, tighter credit spreads and the tax charge.

Equity-trading revenue was little changed from a year earlier at $1.15 billion, affected by a $143 million loss on a margin loan. The loss was tied to South African retailer Steinhoff International Holdings NV, according to a person with knowledge of the transaction.

Excluding the one-time charges, the decline in overall trading revenue was 17 percent, slightly worse than Lake’s guidance from December. Lake said the trading environment at the beginning of 2018 is “consistent” with the end of last year.

JPMorgan’s shares rose 0.9 percent to $111.85 at 9:53 a.m. in New York. The stock climbed 29 percent in the past year through Thursday.

Here’s a summary of JPMorgan’s fourth-quarter results:

• Net income dropped 37 percent to $4.23 billion, or $1.07 a share, from $6.73 billion, or $1.71, a year earlier.
• Adjusted earnings per share were $1.76, the company said, beating the $1.69 average estimate of 16 analysts surveyed by Bloomberg.
• Excluding the impact of the tax changes, net income would have been $6.7 billion.
• Provisions for loan losses increased 51 percent from a year earlier to $1.31 billion, lower than the $1.48 billion analysts predicted.
• Net revenue rose 5 percent to $25.5 billion, while noninterest expenses climbed by a similar percentage to $14.6 billion, driven largely by higher compensation costs and auto lease depreciations.
• Profit in its commercial bank surged 39 percent to $957 million, helped by higher revenue from deposit spreads and loan growth, as well as a $115 million benefit tied to the tax changes.
• Wealth-management profit climbed 12 percent to $654 million on rising markets and increasing interest income on deposits and loans.
• Earnings from consumer banking increased 11 percent to $2.6 billion on higher deposit margins.
• Net interest margin, the difference between what a bank pays depositors and charges borrowers, climbed 5 basis points to 2.42 percent from the previous quarter, exceeding analysts’ 2.39 percent estimate.
• Interest income rose 11 percent from a year earlier to $13.35 billion, exceeding estimates.