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JPMorgan's profits jump as economy, investment bank recovers

Friday, January 15, 2021 | Ken Sweet, AP Business Writer


A Chase ATM is open, Wednesday, Jan. 13, 2021 in New York. JPMorgan Chase & Co., the nation’s largest bank by assets, said its fourth quarter profits jumped by 42% from a year earlier, as the firm’s investment bank division had a stellar quarter and the bank’s balance sheet improved despite the pandemic. (AP Photo/Mark Lennihan)

CHARLOTTE, N.C. (AP) — JPMorgan Chase & Co., the nation's largest bank by assets, said its fourth quarter profits jumped by 42% from a year earlier, as the firm's investment banking division had a stellar quarter and its balance sheet improved despite the pandemic.

The New York-based bank said it earned a profit of $12.14 billion, or $3.79 per share, up from a profit of $8.52 billion, or $2.57 per share, in the same period a year ago. Excluding one-time items, the bank earned $3.07 a share, which is well above the $2.62 per share forecast analysts had for the bank.

The one-time item was JPMorgan “releasing” some of the funds it had set aside last year to cover potential loan losses caused by the coronavirus pandemic and subsequent recession. Banks had set aside tens of billions of dollars to cover potentially bad loans, and JPMorgan had been particularly aggressive in setting aside funds early in the pandemic.

Releasing those funds goes straight to a bank's bottom line when it reports its results, but it's not money that the bank generated from loans, customers or borrowers. It's just funds that were effectively put into escrow and are no longer in escrow.

The release reflects improvement in the economy — though it's still not fully recovered from the shutdowns of March and April — and the trillions of dollars in stimulus funds that have flowed to individuals and businesses.

One sign of that could be seen in the bank reporting incrementally lower credit card and auto loan revenues, largely due to borrowers paying down balances the bank said.

But the $2.9 billion release is only a fraction of what JPMorgan set aside last year, and with the pandemic raging across the globe and particularly here in the U.S., it's uncertain how much more the bank will release in the coming months.

“While positive vaccine and stimulus developments contributed to these reserve releases this quarter, our credit reserves of over $30 billion continue to reflect significant near-term economic uncertainty,” said JPMorgan CEO Jamie Dimon in a statement.

The driver of JPMorgan's profits this quarter was the investment banking business. The corporate and investment bank posted a profit of $5.35 billion compared with $2.94 billion in the same period a year earlier. JPMorgan said it saw higher investment banking fees — money banks collect to advise companies on going public or buying other companies — as well as higher fees from its trading desks.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
JPMorgan Chase & Co. (JPM)2.5$151.55-1.1%2.38%19.81Buy$128.90
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7 Semiconductor Stocks Set to Gain From the Chip Shortage

Who knew that something so tiny could create such a big problem? However, that’s the case with the semiconductor industry. Chip manufacturers are facing supply chain disruptions due to the Covid-19 pandemic.

Semiconductors are in high demand for the big tech companies who need the chips to power the servers for their data centers. But they are also needed for much of the technology we take for granted including laptops, tablets, mobile phones, gaming consoles, and automobiles – a sector that seems to be at the root of the current crisis.

Any weekend mechanic knows that even traditional internal combustion cars are heavily reliant on electronics. In fact, electronic parts and components account for 40% of a new, internal combustion vehicle. That’s more than doubled since 2000.

However as it turns out, some manufacturers may have overestimated how soon consumers would be ready for an “all-electric” future. And that meant that they didn’t forecast how much demand there would be for the kind of chips needed to do the mundane, but vital tasks of steering, braking, and even powering windows up and down.

Part of the problem is that U.S. businesses are heavily reliant on countries like China and Taiwan for their semiconductors. In fact, only about 12.5% of semiconductor manufacturing is done in the United States.

Of course, this creates a tremendous opportunity for the companies that manufacture these chips. And it comes at a good time. The semiconductor sector is notoriously cyclical and was coming down from the elevated demand for the 5G buildout.

In this special presentation, we’ll give you a list of seven semiconductor companies that you can invest in to take advantage of this opportunity.

View the "7 Semiconductor Stocks Set to Gain From the Chip Shortage".

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