JPMorgan's Stock Falls With Bank's Trading Revenues

Despite a little more volatility in the last three months of the year, America’s largest bank by assets is in a trading rut. It also had $990 million in legal charges.

In the last three months of 2014, JPMorgan Chase, had earnings per share of $1.19, or a net income of $4.9 billion, down from $5.3 billion in the fourth quarter of last year. The bank's profit slide of 6.6% from the fourth quarter of last year also fell short of analysts' expectations of $1.31 and the bank's stock sagged 1.43% to $58.00 in early trading. The bank, the largest in the United States by assets, was weighed down by $990 million worth of legal charges.

In November, JPMorgan was one of six large banks to pay big fines to settle charges from British and American regulators that its traders had manipulated the foreign exchange market.

The bank's large and lucrative trading businessess saw sizable declines in revenue, with fixed income trading revenue sinking 23% from last year to $2.5 billion. The bank attirbuted the decline to "lower revenues in credit-related and securitized products" along with the sale of some businesses, including physical commodities trading. Not counting those sales, the fixed income business still saw a 14% declined in revenue, while equity trading revenue of $1.1 billion was up 25%, which the bank credited to more revenue from derivatives based on stocks and services to hedge funds.

The poor trading results, which are expected across Wall Street, were previewed late last year by a high-ranking JPMorgan executive.

In a December speech, JPMorgan chief financial officer Marianne Lake projected a "high teens" decrease in trading revenue, 8 percentage points coming from exiting commodities trading businesses, about $300 million.

Lake also said there had been an "uptick in realized in volatility particularly in foreign exchange and [interest] rates," but said it was "low realtive to where you would expect it to bein a m ore vibrant market." Banks with large trading operations like JPMorgan tend to generate more revenue in more volatile markets, as larger swings in prices encourage more trading.

With the exception of some choppiness in October, markets have stayed relatively quiet, with bankers and traders wondering where higher activity could come from. "It's possible that while we're going to see a little bit more volatialty and hopefully that presents more opportunity, it'sl ikely the first half of next year at least is going to...continue to be challenging," Lake said in December.

"2014 was a record year for the Firm for net income and EPS. We delivered on our commitments – including business simplification, controls, expense discipline and meeting our capital targets for the year – while maintaining excellent customer satisfaction rankings," JPMorgan's chief executive officer and chairman said in a statement. "I am proud of this great company, its exceptional management team and employees, and everything we are achieving for our clients, shareholders and communities."

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