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JPMorgan says tax changes will spur more profits after quarterly beat


By and David Henry

(Reuters) - Chase & Co beat Wall Street's fourth-quarter earnings expectations on Friday and said changes will help future profits by not only reducing the amount it pays the federal but also by stimulating more business.

JPMorgan, the biggest U.S. by assets, recorded $2.4 billion in one-time charges in the fourth quarter related to the changes. However, it expects its effective rate to drop to 19 percent this year from 32 percent last year, which will save it billions of dollars.

The sweeping changes signed into in December, designed to kick-start economic growth, slashed the U.S. corporate rate to 21 percent from 35 percent.

As a result, said it expects corporations to borrow more, offer more stock and pursue more mergers and acquisitions, all of which would boost revenue.

Although the plans to use some of that money for compensation, business investments, helping rural communities and other uses, it will mostly boost profits, executives said on a call with analysts.

"Much of it will fall to our bottom line in 2018 and beyond," said on a call with analysts.

The bank's shareholders should benefit as returns more capital to them through dividends and stock buybacks, she said.

Several financial companies, including Inc and Morgan Stanley, have warned investors that they will face short-term pain over some of the changes. However, over the longer term, the changes are widely expected to generate gains for large U.S. corporations.

Some of the benefits will likely be lost as vie to offer better deals to customers, starting with businesses where prices change more quickly, said.

JPMorgan's charges related to a one-time repatriation on income it has kept abroad and adjusting the value of its deferred assets and liabilities. The said it does not expect to bring any substantive amount of the foreign cash home, because it has capital and liquidity requirements abroad.

JPMorgan's shares were up 1.3 percent at $112.18.


Excluding one-time items, JPMorgan's fourth-quarter profit was higher than analysts had expected. Rising interest rates produced gains in net interest income that offset a slowdown in trading revenue.

The bank's adjusted net profit was $6.7 billion, or $1.76 per share, compared with the average estimate of $1.69 per share. Net revenue rose 4.6 percent to $25.45 billion and beat the estimate of $25.15 billion. (

Including the charge, its net profit fell to $4.23 billion, or $1.07 per share, from $6.73 billion, or $1.71 per share, a year earlier.

Analysts were generally positive about the results, although some asked for more detail on how the will use its expected savings and expressed concern about the benefits fading quickly in a competitive environment.

JPMorgan's earnings per share would have been 17.5 percent higher last year if its taxes had been as low as they will be going forward, according to an estimate by of Evercore ISI, who rates shares "outperform."

"Good economy, lower rate and continued JPMorgan-specific strength ... should keep people plenty happy," he wrote in a note to clients.

Trading revenue across the industry has been under pressure due to low volatility. Markets were especially active in the year-earlier quarter as investors changed positions around the U.S. election.

JPMorgan's bond trading revenue fell 27 percent. Equity trading revenue was flat, after a mark-to-market loss of $143 million on a margin loan related to troubled South African retailer

The set aside an additional $130 million for potential credit losses related to Steinhoff, which has been embroiled in an accounting scandal.

Lake said other may also take a hit from the loan which was syndicated. Other with substantial lending exposure to Steinhoff include Commerzbank, , Calyon, BNP, HSBC, Inc, and of America Corp.

Rising interest rates helped cushion the blow from lower trading revenue, lifting net interest income by 11 percent to $13.4 billion.

(Reporting by in Bengaluru and in New York; Writing by Lauren Tara LaCapra; Editing by and Bill Rigby)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Fri, January 12 2018. 21:33 IST