JPMorgan Chase kicked off earnings season Friday with a big miss. But that’s because of some strange accounting.
The bank’s fourth-quarter profit fell by 15% from the year before, to $9.3 billion, way less than analysts surveyed by FactSet had expected.
Earnings per share came in at $3.04, also well under the $3.35 estimated by FactSet.
Those numbers might imply the bank is struggling. But that’s far from true: JPMorgan just notched its most profitable year on record. Revenue grew by 23% to $158 billion in 2023. Profit also grew by 32% for the year to $49.6 billion.
So what explains the discrepancy?
Blame the regional banking crisis.
It cost the Federal Deposit Insurance Corporation about $23 billion to clean up the mess that Silicon Valley Bank and Signature Bank left in the wake of their collapses last spring. It was large banks that mostly footed that bill.
JPMorgan’s profit was dragged lower by a one-time $2.9 billion charge the bank had to pay related to the crisis.
Without that one-time payment, JPMorgan said its earnings would have come in closer to $3.97 per share, blowing estimates away.
JPMorgan, the largest US bank by assets, is often viewed as a bellwether for the rest of Wall Street. And other banks certainly experienced similar problems.
Bank of America paid a $2.1 billion FDIC fee for the crisis. The bank reported fourth-quarter earnings of 35 cents per share, missing FactSet estimates of 53 cents per share. The bank said that without one-time fees, earnings for the quarter would have been about 70 cents per share.
Citigroup paid a $1.7 billion fee to the FDIC. The bank reported an earnings loss of $1.16 per share for the fourth quarter, falling below earnings estimates of 11 cents per share, according to FactSet. Fourth-quarter earnings would have been 84 cents per share without one-time costs, Citi said.
Citi saw several additional costs that impacted its results, including an $880 million loss in Argentina and $780 million in restructuring costs.
A JPMorgan spokesperson told CNN that FactSet and other analyst estimates did not include that special fee in their forecasts.
“To be clear, our net income was reduced by $0.74 per share because of the [Federal Deposit Insurance Corporation] Special Assessment,” wrote the spokesperson in an email Friday morning. “We reported EPS of $3.04, which may initially look like a miss, but many analyst estimates did not include the $0.74 per share we paid to the FS.”
Shares of JPMorgan soared 27% last year, the best among all large banks in the United States. Shares of the stock were up 1.8% in premarket trading.
