JPMorgan Chase (JPM) released its fourth-quarter earnings this morning, and it fared pretty well considering the never-ending series of legal settlements it had to overcome.
The bank posted a fourth-quarter profit of $5.3 billion, or $1.30 per share, down from $5.7 billion, or $1.39 a share, in the fourth quarter of 2012.
While the company’s earnings report shed some light on the true status of the bank, the earnings call addressed three additional outstanding issues that are relevant to investors.
No. 1: The bank announced plans to cut its employee headcount by as many as 19,000 people due to mortgage-related issues in February of 2013. While on the call, an analyst asked Marianne Lake, chief financial officer of JPMorgan Chase, to recap where the bank currently stands on layoffs.
"By the end of 2013, we had seen 16,500 in total. So in the consumer bank, we’ve actually not only accelerated, but outperforming our expectations in terms of our ability to run those branches efficiently and still maintain very strong customer satisfaction and retention rates," Lake explained.
Meanwhile, in the mortgage space alone, total headcount is down 11% year-over-year against that 13,000-to-15,000 two-year target.
"We still have meaningful improvement expected in terms of delinquencies and foreclosures and modifications that will continue to drive costs and headcount down in ’14," Lake explained.
No. 2: Paul Miller, a managing director at FBR Capital Markets, asked Lake to expand on the dip in the bank’s mortgage origination platform.
"It looks like you dropped from about $40 billion to about $23 billion, and your overall market dropped like 25%, and that’s like a 40% drop, which drops probably your market share to low 8%," Miller said on the call.
"If you just take the second half versus the first half, we said that we thought that the overall market would be down 30% to 40%. It was down about 33%," Lake said.
As a result, it was in line with expectations and performance was in line with that too, she added.
"With respect to market share, if you look backwards into ’13, the overall size of the market was revised up, which means that our market share was, all other things being equal, just relatively revised down, doesn’t change anything," Lake said.
No. 3: Chairman and CEO Jamie Dimon and Lake were asked about what the mortgage market will look like with Rep. Mel Watt leading the Federal Housing Finance Agency.
"Do you think that Watt can be successful in opening the credit curve? And what type of things would you want to hear where you would start extending the credit box?" Miller asked.
While people in the business have been slowly extending the credit box over the last 18 months, I’m not sure you’re going to see a dramatic expansion of the credit box, Dimon said.
"The FHA will set its own policy, but even there, I think people are going to have a much tighter underwriting than the FHA guidelines because of how much FHAs cost people," Dimon added.
Despite the surplus in news, Dick Bove, an analyst with Rafferty Capial Markets, said, "The important thing for people investing in JPMorgan or Wells Fargo to remember is that they are not one trick ponies."
At the end of the day, the bank posted a strong profit for the fourth quarter, paving the way for 2014.