JPMorgan Chase (NYSE: JPM ) reported fourth-quarter earnings this morning, the first big bank to do so. Overall, they were fantastic -- a $3.3 billion, or $0.74-per-share, profit on revenue of $25.2 billion. For full-year 2009, net income was $11.7 billion, or $2.26 per share. Not bad for one of the deepest recessions in decades.
But before declaring victory, I always like to dig into the earnings supplemental and find out exactly where the income came from. When broken out by segment, here's how it looked last quarter:
|
Segment
|
Q4 Net Income
|
|
Investment banking
|
$1.9 billion
|
|
Retail financial services
|
($399 million)
|
|
Card services
|
($306 million)
|
|
Commercial banking
|
$224 million
|
|
Treasury and securities services
|
$237 million
|
|
Asset management
|
$424 million
|
|
Corporate/private equity
|
$1.2 billion
|
|
Total
|
$3.3 billion
|
Ah … just like every quarter of the past year, the money's flowing heavily in investment banking and corporate (essentially trading), while traditional commercial banking segments are still a mess.
To show where exactly the investment banking segment is pulling it in, we can dissect that segment further. Since JPMorgan doesn’t break out the net income, here is a breakdown of the $4.9 billion revenue that led to the $1.9 billion in investment banking net income:
|
Segment
|
Q4 Revenue
|
|
Advisory
|
$611 million
|
|
Equity underwriting
|
$549 million
|
|
Debt underwriting
|
$732 million
|
|
Fixed-income markets
|
$2.7 billion
|
|
Equity markets
|
$971 million
|
|
Credit portfolio
|
($669 million)
|
|
Total
|
$4.9 billion
|
Note how incredibly important the fixed-income markets line is.
Look at it this way: Investment banking accounts for 58% of net total income, and fixed-income accounts for 55% of investment banking revenue. Fixed-income revenue was down by almost half compared with the previous three quarters, but it's still a huge contributor to the bottom line.
Digging deeper into the credit quality of commercial banking, here's what you'll find:
|
Segment
|
Q4 2009
|
Q3 2009
|
|
Net charge-off rate
|
1.92%
|
1.11%
|
|
Allowance for losses/average loans
|
3.03%
|
2.95%
|
|
Nonperforming loans/average loans
|
2.80%
|
2.21%
|
And for credit cards …
|
Segment
|
Q4 2009
|
Q3 2009
|
|
30-days+ delinquent
|
6.28%
|
5.99%
|
|
90-days+ delinquent
|
3.59%
|
2.76%
|
|
Net charged-off rate
|
9.33%
|
10.30%
|
Bottom line
These results are good, but need an important caveat: Capital markets are extremely strong, while traditional lending remains quite bad. This is exactly why Goldman Sachs (NYSE: GS ) has done extremely well, JPMorgan has done pretty well, and Citigroup (NYSE: C ) and Bank of America (NYSE: BAC ) have done not so well over the past year. Banking results have tended to track the segmental mix of a company's balance sheet more than they have the skill and expertise of that bank.
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