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JPMorgan’s Earnings Deliver, But Challenges Loom

JPMorgan Chase kicked off earnings season today (Jan. 14) for the banking giants, beating expectations, as Jamie Dimon’s empire showed that the outlook isn’t all doom and gloom for the big banks.

After all, JPMorgan’s fourth-quarter earnings posted a profit of $5.4 billion — a 10 percent increase from last year’s Q4. Revenue, however, was just up 1 percent on the same quarter to roughly $23.7 billion. The full year profit for 2015 was a record $24.4 billion on a revenue of $96.6 billion.

That profit was attributed to the bank’s efforts, like its counterparts, to cut costs and reduce staff (which it did so by 14,000 people in Q4 alone). Since 2012, the bank has cut nearly 43,000 positions.

Cutting costs has been easier to do on the workforce side since fewer and fewer consumers are stepping into banks, instead turning online and to mobile apps. JPMorgan’s mobile banking side continues to lead in the industry, with Q4’s figures showing Chase now has 23 million customers, which is a 20 percent increase from the year prior. Deposits are also up 10 percent on the year.

“The consumer business continues to gather deposits, outpacing the industry. Markets were somewhat quieter, and we saw the impact reflected in the results of our trading and Asset Management businesses,” Dimon, JPMorgan’s Chairman and CEO, wrote in the company earnings release. “On operating leverage, we delivered core efficiencies while continuing to invest in innovation and technology, infrastructure and talent – crucial for protecting the company and customers, and for our growth.”

“The firm is getting safer and stronger each year. We are continuing to adjust our strategy to the new world and to meeting all requirements. We see exciting opportunities to invest for the future, to continue to deliver better and faster for our clients and customers,” Dimon concluded.

On the payments side, credit card sales volume was up 6 percent, and merchant processing volume was up 12 percent. For small business, JPMorgan Chase provided $22 billion of credit for U.S. small businesses. For consumers, the bank provided $233 billion of credit.

As Dimon hinted above, there are still challenges ahead for the federal regulations on big banks, which has made capital requirements stricter on banks following the financial crisis. A year ago, during the company’s 2015 Q4 earnings call, Dimon went as far as saying: “Banks are under assault. We have five or six regulators coming at us on every issue.”

That was at the same time there was pressure from regulators to split the bank into two in order to maintain two strong organizations instead of one massive banking giant. But Dimon wasn’t buying it, saying that “the company is an extremely powerful thing. [Size] isn’t the determinant.”

In the end, Dimon said then that the bank will only split if the regulators make them do so. And there hasn’t been much chatter since.

Regulators’ concerns suggest that size is an issue, particularly if another major recession hits again, but Dimon claims that “diversification was why [JPMorgan] was able to wade through the crisis. Dimon recognized in 2015’s Q4 (when the bank missed its earnings expectations, posting a 6.6 percent drop in quarterly profit after it shelled out more than $1 billion in penalties and legal expense for the bank’s actions in the foreign exchange markets), that the company doesn’t make long-term decisions based on the “current narrative.”

“The company has earned good returns in all its businesses throughout this crisis. And I’m going back 2010, 2011, 2012, and that’s a sign of stability. … The model works from a business standpoint,” he said.

Fast forward to today, and it appears that model is working out for Dimon.

But of course, with the shaky stock market, especially as China’s economic slowdown has sent a ripple effect into the U.S. market, it could be a rocky year ahead. And during JPMorgan’s earnings call, CFO Marianne Lake noted that the year has been “challenging” so far, but she noted that it’s too early to speculate on what the year will bring.

And then there’s the ongoing issue of dealing with the Fed, but even Dimon, following his typical response, said that he isn’t overly worried about decisions the Fed makes regarding regulation and rate hikes.

“Whatever it is, we’ll deal with it,” he said on a call with with analysts Thursday morning.

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