Investment bank JP Morgan Chase has revealed its first earnings report which accounts for charges relating to new tax laws. The earnings exceeded Wall Street expectations, despite the $2.4 billion levy applied during Q4 as a result of the Tax Cuts and Jobs Act. Earnings adjusted to incorporate the charge were an EPS of $1.76 against an expected $1.69 and revenues of $25.45 billion against an expected $25.15 billion, according to Thomson Reuters.
CEO Jamie Dimon was effusive in his assessment of the bill, despite the huge charge it imposed on the bank. He said: “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. The cumulative effect of retained and reinvested capital in the U.S. will help grow the economy, ultimately growing jobs and wages.”
Dimon also sounded a note of precaution, emphasising how difficult the trading environment currently was for the bank. Revenue from JP Morgan’s fixed income markets has fallen 34 percent, due to what the report describes as ”continued low volatility” and “tighter credit spreads”, while revenue from equity markets was flat in comparison with the previous year’s results. But despite this, the bank’s overall performance exceeded expectations, with $6.7 billion in capital brought home to shareholders during Q4, and $4.7 billion in net stock buybacks.
The medium-term forecast for JP Morgan is positive, particularly with the financial services sector expected to gain the most from Republican tax reforms, which included a lowering of the corporate tax rate from 35 percent to 21 percent. As a result of the corporate tax reduction, JP Morgan is anticipating an effective tax rate of 19 percent for the fiscal year of 2018.
JP Morgan shares have increased by 31 percent over the past 12 months, and at end of trading on Friday, shares were up 1.65 percent, helping the stock price to reach an all-time high. The investment bank remains one of the world’s largest and wealthiest financial institutions, with assets of $2.5 trillion.