J. P. Morgan Chase (NYSE: JPM) is the largest bank in terms of assets, which provides its financial services worldwide. The company received its current name as a result of the merger into 2000 two leaders of the sector: Chase Manhattan и J. P. Morgan.
Mid-January. P. Morgan Chase presented a report for 4 Quarter 2021, which investors perceived extremely negatively - the company's shares collapsed by 6%:
- revenue compared to the same period last year remained virtually unchanged and amounted to 29,257 bn USD vs market consensus of 29,78 billion dollars. The adjusted figure increased by 1% - up to 30.349 billion dollars;
- net earnings per share fell by 12% — with 3,79 to 3,33 $ - with a forecast in 3,04 $. The decrease in this indicator also led to a decrease in profitability: ROTCE — c 24 to 19%, ROE — c 19 to 16%;
- in 4 in the quarter, the bank distributed about $5 billion among shareholders through dividends and buybacks;
- management provided a weak outlook for 2022, in which the company expects an increase in costs and a decrease in revenues.
results
Business J.. P. Morgan Chase divided into four divisions:
- Banking - 40%.
- Corporate investment services — 37%.
- Asset Management - 15%.
- Commercial banking - 8%.
Banking service.
Segment J, the largest by revenue. P. Morgan Chase, which provides its services to consumers through bank branches, ATMs and digital communication channels. In its turn, this business is further divided into three smaller areas: consumer and business banking, card and car loans, mortgage department.
IN 4 Q2 2021 Banking segment showed neutral results, which have declined slightly.: net profit fell by 2% - up to 4.2 billion dollars, revenue — on 4%, up to $12.3 billion. The main reason is the poor performance of the mortgage department.
Results of the three directions: consumer and business banking grew by 7% — up to 6.172 billion dollars — against the backdrop of growth in client assets, card and car lending decreased by 9% - up to $5 billion - due to the high base of last year, mortgage department collapsed on 26% - up to $1.1 billion - due to lower margins.
Banking division results, billion dollars
| 4к2020 | 4к2021 | The change | |
|---|---|---|---|
| Consumer and business banking | 5,744 | 6,172 | 7% |
| Card and car lending | 5,528 | 5,019 | −9% |
| Mortgage Department | 1,456 | 1,084 | −26% |
| Division's total revenue | 12,728 | 12,275 | −4% |
| Net profit | 4,325 | 4,227 | −2% |
Corporate investment services.
The second largest segment of the company, which earned the highest net profit in the current quarter. Conventionally, this division is divided into two departments: securities market and banking services. The first provides brokerage services, global market maker services, etc., and the second - investment banking services, e.g. investment advice, raising capital and borrowed money and much more.
Moving on to the results 4 quarter of 2021, it is worth noting, that they are mixed: revenue added 2%, net profit fell by 9% due to the growth of non-interest expenses, which have increased by 18%, mainly due to higher compensation costs, brokerage and legal fees.
As for departments, then revenue from securities market services decreased by 13% - to $6.264 billion - against the backdrop of falling prices for fixed income securities due to future rate hikes. Banking income, vice versa, increased by 28% - up to $5.270 billion - due to higher advisory fees.
Results of the Corporate and Investment Services division, billion dollars
| 4к2020 | 4к2021 | The change | |
|---|---|---|---|
| Services on the securities market | 7,235 | 6,264 | −13% |
| Banking | 4,117 | 5,270 | 28% |
| Division's total revenue | 11,352 | 11,534 | 2% |
| Net profit | 5,349 | 4,847 | −9% |
Asset Management.
Fastest Growing Subdivision J. P. Morgan Chase, which serves the largest financial institutions and shows double-digit growth rates. At the end of 2021, the company managed over $3.1 trillion in assets.
IN 4 Q2 2021 revenue increased to $4.473 billion driven by higher management fees and growth in deposits and loans. Net profit added 46% and increased to 1.146 billion dollars due to the growth of assets, which year on year increased by 15%.
Results of the Asset Management division, billion dollars
| 4к2020 | 4к2021 | The change | |
|---|---|---|---|
| Division's total revenue | 3,867 | 4,473 | 16% |
| Net profit | 0,786 | 1,146 | 46% |
| Assets under management | 2700 | 3100 | 15% |
Commercial banking.
The smallest branch of the bank, that works with companies, local authorities, as well as commercial property owners. Basic Services: various forms of secured financing, work with payments and receipts, capital raising, balance management, risk and more.
As for the results 4 quarter, then they are neutral: revenue increased by 6% — up to 2.612 billion dollars — against the backdrop of large income from investment activities, net profit fell by 38% - to $1.251 billion - due to the huge dissolution of credit reserves last year.
Results of the Commercial Banking division, billion dollars
| 4к2020 | 4к2021 | The change | |
|---|---|---|---|
| Division's total revenue | 2,463 | 2,612 | 6% |
| reserves | −1,181 | −0,089 | −93% |
| Net profit | 2,034 | 1,251 | −38% |
Profit distribution
As earlier, management is not going to change its own principle of distribution of the earned net profit of the company, the hierarchy of which consists of two levels. The first is an investment in the future growth of an American bank., it is given top priority. The second is the payment of steadily growing dividends and buyback.
IN 4 quarter management distributed among its shareholders 50% net profit for the period: 3 billion through dividends and $1.9 billion through share buybacks. And in total for 2021 J. P. Morgan Chase & Co pays out $28.6 billion to shareholders, which, with the current capitalization of about $466 billion, corresponds to the yield 6,1%.
Comparison with competitors and forecast for 2022
J. P. Morgan Chase has been underperforming in the past year compared to its industry peers. This fact is explained by weak financial results of the bank., disappointing management outlook for 2022, high multiples and more robust stock performance before.
As for the forecast, then after the publication of the company's financial results for 4 quarter 2021 management J. P. Morgan Chase announced it for next year. Basic moments:
- Bank on 2022 and 2023 reduces its past ROTCE forecast from 17 to “less than 17%” due to increased investment and rising inflationary pressures. In the medium term, the Board of Directors is confident, that can return to the past goal.
- Net interest income in 2022 will add 12% and grow up with 44,5 up to $50 billion due to an increase in the key rate and growth in income from credit cards and from the placement of securities.
- Adjusted costs will increase by 8% - up to 77 billion dollars - against the backdrop of investments in the banking network, marketing and IT, which year by year will grow from 11,3 up to 15 billion dollars.
Comparison with competitors
| P / E | P / BV | ROTCE | |
|---|---|---|---|
| J. P. Morgan Chase | 9,74 | 1,59 | 19% |
| Bank of America | 13,52 | 1,44 | 15,85% |
| Morgan Stanley | 12,46 | 1,68 | 19,6% |
| Wells Fargo & Company | 11,21 | 1,22 | 15,3% |
| Citigroup | 6,05 | 0,66 | 7,4% |
What's the bottom line?
J. P. Morgan Chase released mixed financial results in 4 quarter of 2021, which, in terms of revenue and net profit, turned out to be worse than last year's data, but the main negative point was the weak management forecast for 2022. Stocks reacted immediately, falling by 6%.
Ideally, investors should purchase the company's securities at a value of one capital or lower., the current value of the share capital per share - 99,53 $. Last time below one share equity J. P. Morgan Chase traded in 1 quarter of 2020.
