JPMorgan profit beats on higher interest rates; debt trading down

(Reuters) – JPMorgan Chase & Co (JPM.N), the biggest U.S. bank by assets, reported a higher-than-expected quarterly profit on Friday as gains in net interest income offset a slowdown in trading revenue.

The bank recorded a $2.4 billion charge to cover a new one-time repatriation tax on income it has kept abroad and to adjust the value of its deferred tax assets and liabilities.

Wall Street analysts were expecting a $2 billion hit, based on comments the company made in December.

The sweeping changes in the tax law enacted by President Donald Trump are expected to mean short-term pain but long-term gain for large U.S. banks that do business worldwide.

“The enactment of tax reform in the fourth quarter is a significant positive outcome for the country. U.S. companies will be more competitive globally, which will ultimately benefit all Americans,” Chief Executive Officer Jamie Dimon said in a statement.

Net profit, adjusted to exclude the tax charge and other one-time items, was $6.7 billion, or $1.76 per share, and beat the average estimate of $1.69 per share, as higher interest rates helped it earn more on its loans. (bit.ly/2AR7AUe)

Net revenue rose 4.6 percent to $25.45 billion and beat the estimate of $25.15 billion, despite a 27 percent fall in fixed income trading revenue, excluding the impact of the tax bill.

Trading revenue across the industry has been under pressure due to low volatility. Markets were especially active in the year-earlier quarter as investors changed positions around the U.S. election.

    Equity trading revenue was flat, including 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, according to a person familiar with the matter.

    Rising interest rates, however, helped cushion the blow from lower trading revenue, lifting net interest income by 11 percent to $13.4 billion.

    Net income, reported under generally accepted accounting principles (GAAP) and including the tax charge, fell to $4.23 billion, or $1.07 per share, in the fourth quarter ended Dec. 31, from $6.73 billion, or $1.71 per share, a year earlier.

    JPMorgan’s shares were little changed at $110.75 in light premarket trading.

    Reporting by Sweta Singh in Bengaluru and David Henry in New York; Editing by Saumyadeb Chakrabarty

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