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It cost the Federal Deposit Insurance Corp. about $23 billion to clean up the mess left after Silicon Valley Bank and Signature Bank collapsed last spring. Big banks covered most of the bill.
new york
CNN
—
JPMorgan Chase & Co. started its earnings season with a bang on Friday. But that’s due to some strange accounting.
The bank’s fourth-quarter profit fell 15% from a year earlier to $9.3 billion, well below the expectations of analysts surveyed by FactSet.
Earnings per share came to $3.04, also well below the $3.35 expected by FactSet.
These numbers may suggest that banks are struggling. But that is far from the truth. JPMorgan just posted its highest profit year ever. Revenue in 2023 increased by 23% to $158 billion, and profits also increased by 32% to $49.6 billion.
So what explains this discrepancy?
It’s because of the local bank crisis.
It cost the Federal Deposit Insurance Corp. about $23 billion to clean up the mess left after Silicon Valley Bank and Signature Bank collapsed last spring. The major banks were primarily responsible for footing the bill.
JPMorgan’s profits were depressed by a one-time $2.9 billion charge the bank had to pay in connection with the crisis.
JPMorgan said without the lump sum payment, earnings would have been closer to $3.97 per share, blowing away expectations.
JPMorgan is the largest bank in the United States by assets and is often seen as a bellwether for the rest of Wall Street. And other banks are certainly experiencing similar problems.
Bank of America paid $2.1 billion in FDIC fees over the crisis. The bank reported fourth-quarter earnings of 35 cents per share, below FactSet’s estimate of 53 cents per share. The bank said that without the one-time fee, profit for the quarter would have been about 70 cents per share.
Citigroup paid $1.7 billion in fees to the FDIC. The bank reported a loss in earnings of $1.16 per share in the fourth quarter, missing earnings estimates of 11 cents per share, according to FactSet. Citi said fourth-quarter earnings would have been 84 cents per share without one-time charges.
Citi incurred several additional costs impacting its results, including an $880 million loss in Argentina and $780 million in restructuring charges.
A JPMorgan spokesperson told CNN that FactSet and other analysts’ forecasts did not include that special fee.
“To be clear, our net income is [Federal Deposit Insurance Corporation] Special recognition,” a spokesperson wrote in an email Friday morning. “We reported EPS of $3.04, which may initially seem like a miss, but many analysts’ expectations do not include the $0.74 per share we paid for FS. I didn’t.”
JPMorgan’s stock price soared 27% last year, the highest among large U.S. banks. The company’s shares rose 1.8% in pre-market trading.
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