Charges Convolute J.P. Morgan Earnings, as Book Value Keeps Rising

Banking, finance, and taxes

Published: January 14, 2014 7:40 am

Last Updated: January 14, 2014 7:44 am

J.P. Morgan Chase & Co. (NYSE: JPM) is leading the wave of banks this earnings season with its fourth-quarter earnings report. The bank turned in earnings per share of $1.30 on revenue of $23.16 billion. Thomson Reuters had estimates of $1.35 in earnings per share and revenues of $23.68 billion. Unfortunately (or fortunately), there is more to the earnings report than just a 7% drop in net income.

While the number may be short on earnings, it appears as though the allocated charges for legal and settlements came to $0.27 per share. Adjusted earnings are represented as $1.40 per share. Another issue is that revenue on a managed basis was listed as $24.1 billion.

It seems that the items in the report are going to convolute just how well or how poorly the numbers should really be taken. Shares were initially up less than 1%, but then they fell by less than 1%.

Jamie Dimon and team reported that the Basel 1 Tier 1 common equity ratio was 10.7%, while the Basel 1 Tier 1 capital ratio was 11.9%. Return on tangible equity was 14%; return on equity was 20% on $13.5 billion of average allocated capital. The bank’s headcount was 251,196 at the end of the quarter, and the average compensation ratio of expenses was 27%.

Book value per share rose to $53.25 in the fourth quarter from $52.01 in the third quarter, and tangible book value per share rose to $40.81 per share from $39.51 in the prior period.

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