JPMorgan Chase Q4 2021 Earnings Report Recap

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JPMorgan Chase (JPM) Financial Results: Analysis

JPMorgan Chase & Co. (JPM) reported mixed earnings for Q4 FY 2021. Earnings per share (EPS) beat analyst expectations but were down 12.1% year over year (YOY). Earnings benefitted from a $1.8 billion release of reserves set aside for bad loans during the pandemic. The bank's quarterly revenue came in below forecasts, falling 0.3% compared to the year-ago quarter. Analysts had predicted a slight rise in revenue. JPMorgan's net interest margin also missed expectations. The bank's shares fell nearly 4% in pre-market trading. Over the past year, JPMorgan's shares have provided a total return of 32.9%, above the S&P 500's total return of 23.5%.

JPM Net Interest Margin

JPMorgan reported a net interest margin of 1.63%, up slightly from the 1.62% posted earlier this year in both the second and third quarters. This key metric measures the difference between the income banks generate from credit products like loans and mortgages and the interest they pay to depositors and other creditors. It is analogous to gross margin reported by non-financial companies, which is the difference between sales and cost of goods sold. Note that JPMorgan refers to net interest margin as "net yield on interest-earning assets" in its financial materials.

In extremely low interest rate environments, net interest margins get squeezed as banks lower rates charged to borrowers in order to remain competitive but are reluctant to push rates they pay to creditors below the lower zero bound. Net interest margins have been squeezed since the Federal Reserve lowered rates in 2020 to help deal with the economic crisis caused by the COVID-19 pandemic.

JPM Loan Growth

JPMorgan's revenue growth has been sluggish over the past two years, partly due to weak loan growth across the banking industry during the pandemic. But loan data from last month suggest that loan growth has started to pick up again. JPMorgan noted that lending activity picked up during the fourth quarter, with firmwide average loans up 6%.

JPMorgan's next earnings report (for Q1 FY 2022) is expected to be released on April 13, 2022.