Menu
Banking Exchange Magazine Logo
Menu

Big bank Q4'14 earnings snapshot

SNL Report: Banks under regulatory assault, says JPMorgan Chase’s Dimon

Big bank Q4'14 earnings snapshot

By Nicole De Dios and Robin Majumdar, SNL Financial staff writers

Three of the four biggest U.S. banks by assets missed Wall Street estimates in the fourth quarter of 2014.

JPMorgan Chase & Co., with net income of $1.19 per share, fell short of the FactSet mean EPS estimate by 12 cents. Citigroup Inc.'s net income of 6 cents per share missed the consensus EPS estimate by 4 cents, while Bank of America Corp.'s net income of 25 cents per share missed by 6 cents.

Wells Fargo & Co. posted net income of $1.02 per share, in line with expectations. Wells also left its big-bank peers far behind in terms of return on average assets, reporting an ROAA of 1.39%, compared to JPMorgan's 0.79%, BofA's 0.57%, and Citi's 0.08%.

Wells Fargo's net interest margin hit the lowest level of the past five quarters, but still led the Big Four banks at 3.05%. On the other hand, Citi's net interest margin reached a five-quarter high of 3.01%. Pressure on margins was especially pronounced at BofA, which saw NIM fall to 2.19%, and at JPMorgan, where NIM declined to 2.15% following a few quarters of improvements.

JPMorgan did lead the pack when it came to nonperforming assets. Its NPAs were only 0.31% of total assets for the quarter, compared to 0.40% at Citi, 0.60% at BofA and 0.92% at Wells Fargo.

Common threads amid banks’ reports

The results came after a quarter of continued expense cuts.

JPMorgan said that it reduced headcount across its consumer and community bank by 12,000 in 2014, while Citi axed almost 10,000 positions and sold many of its operations, such as retail banking in Japan and retail and commercial banking in Peru. For the fourth quarter alone, BofA cut roughly 5,800 positions and closed more than 50 branches, according to SNL data. Chairman and CEO Brian Moynihan remarked that, even after all of that, BofA takes "additional action on expenses every afternoon."

Conflict with regulators was also an enduring theme. Subsidiaries of all four banks were subjected to a FINRA fine totaling $43.5 million in connection with Toys R Us' initial public offering, and three of the banks were hit by the OCC's $950 million penalty over foreign exchange trading. JPMorgan's earnings included $1.1 billion in legal expenses, while Citi's results included a $3.5 billion charge to cover legal expenses and costs tied to the company's ongoing restructuring.

Want more banking news and analysis?

Get banking news, insights and solutions delivered to your inbox each week.

Wells Chairman, President and CEO John Stumpf spoke of "spending more on all things risk," while CFO John Shrewsberry touched on the issue of capital buffers.

"[T]he industry doesn't understand the need for the magnitude of the … loss-absorbing capacity that's being talked about [in TLAC]. We certainly find that it lands a little bit harder on people who seem to have less risky business models," Shrewsberry said during the bank's quarterly earnings conference calls, according to a transcript. "We'd like some clarity on why that makes sense."

JPMorgan Chairman, President, and CEO Jamie Dimon went further and reportedly described banks as being "under assault" by regulators.

To a certain extent, that is a legitimate complaint, says William Schwartz, DBRS senior vice-president and head of U.S. FIG.

"If the rules keep changing, it's very hard for them to plan for the medium and long term," Schwartz said. "If the ground's constantly moving underneath you … that, in and of itself, without anything else, makes a very difficult operating environment."

On the other hand, Schwartz noted that post-crisis some banks continue to engage in "egregious behaviors."

"They have to completely reset their cultures, those that have had multiple problems—and that includes JPMorgan Chase," he told SNL.

Citi CEO Michael Corbat, for whom another round of stress tests looms, has said that "the CCAR process is never behind you." Dimon, meanwhile, reminded listeners during JPMorgan's earnings conference call that "in the real-life crisis, we did fine, and in any future crisis, we're going to do fine."

http://www.bankingexchange.com/images/Dev_SNL/12915_WellsFargo_JPMorgan.jpgFor a larger version, click on the image

 

http://www.bankingexchange.com/images/Dev_SNL/12915_City_BankofAmerica.jpgFor a larger version, click on the image

 

Print an SNL Financial reprint of this article

SNL Financial

SNL Financial, now part of S&P Global Market Intelligence, is the premier provider of breaking news, financial data, and expert analysis on business sectors critical to the global economy: Banking, Insurance, Financial Services, Real Estate, Energy, Media & Communications and Metals & Mining. SNL's business intelligence service provides investment professionals, from leading Wall Street institutions to top corporate management, with access to an in-depth electronic database, available online and updated 24/7. This article originally appeared on the subscriber side of SNL Financial's website in slightly different form and appears on www.bankingexchange.com as part of a cooperative venture. Each week a selected SNL article will be brought to our readers. Click here to learn more about SNL Financial and to obtain a free trial subscription. 

back to top

Sections

About Us

Connect With Us

Resources