By Elizabeth Dilts and Siddharth Cavale
(Reuters) - JPMorgan Chase & Co (N:JPM) missed profit estimates for the fourth quarter as a slump in bond trading revenue overpowered strong consumer loan growth and record revenues.
It was the first time JPMorgan Chase, the largest U.S. bank by assets, has underperformed earnings-per-share expectations in 16 quarters, according to Barclays (LON:BARC) equity analyst Jason Goldberg.
JPMorgan was the second large U.S. bank to point the finger at choppy markets in December for its bond revenue losses. Citigroup Inc (N:C) on Monday posted a sharp drop in fixed income revenue, blaming widening credit spreads, or the premium investors demand for holding corporate bonds over safer U.S. Treasury securities.
Goldman Sachs (N:GS) and Morgan Stanley (N:MS), which report earnings later this week, are likely to say they experienced the same effects in their large fixed-income trading businesses.
Well Fargo & Co (N:WFC), which relies less on trading, said on Tuesday that fourth-quarter revenue missed expectations as revenue across all its banking units declined, especially at community banking.
Despite an 18 percent drop in JPMorgan's quarterly fixed-income revenue, Chief Financial Officer Marianne Lake said one down quarter does not make a trend.
"The outlook for growth in the economy is still strong," she said on an analyst call. "The consumer is still strong and healthy. We are expecting to see maybe slower but still global growth going forward."
Its shares were up 1.3 percent to $102.30 on Tuesday.
(GRAPHICS: JPMorgan Corporate & Investment Bank Revenue breakdown - https://tmsnrt.rs/2T1tf65)
The bank increased its provision for credit losses by $240 million from a year earlier, with roughly two-thirds for commercial and industrial loans.
Lake said the rise in provisions were "driven by literally a handful of names across a handful of sectors."
'MORE PARANOID THAN YOU ARE'
Asked about any broader concerns over clients' credit-worthiness, Lake said, "There's nothing to see right now in our portfolios and we're looking. We're more paranoid than you are."
JPMorgan's equities trading revenue rose 2 percent from a year earlier, helped by strength in prime brokerage, which serves hedge fund clients.
Investment banking revenue rose 3 percent on higher advisory fees, even as underwriting fees declined.
Revenue in asset and wealth management fell 5 percent as market declines translated into lower asset levels and management and performance fees.
Trading desks at banks have been shaken by global growth concerns and the ongoing trade war between the United States and China. Bank stocks underperformed the S&P 500 index (SPX) in 2018 by 13 percent.
On a conference call with reporters, JPMorgan Chief Executive Officer Jamie Dimon said the partial U.S. government shutdown will hurt the U.S. economy if it persists.
"We don't know exactly what it is going to do, but it is not a positive," he said.
JPMorgan said expenses rose 6 percent, outpacing revenue growth as it invested in technology, marketing and real estate.
Net income increased 67 percent to $7.07 billion, or $1.98 per share, from a year ago, when it took a one-time charge due to the U.S. tax overhaul. But it missed analysts' average estimate of $2.20 per share, according to IBES data from Refinitiv.
Net interest income was up 9 percent to $14.5 billion on higher interest rates in 2018.
The bank's average core loan book grew 6 percent from the year-earlier quarter.
Revenue rose 4.1 percent to $26.80 billion, shy of the average analyst expectation of $26.83 billion.