JPMorgan Chase & Co. made more money in the fourth quarter than it ever has, as it signaled more optimism about borrowers being able to repay their loans and the pandemic-fueled trading surge continued.

The biggest U.S. bank posted a jump in trading and investment-banking fees that helped its Wall Street unit close out its most profitable year ever. The bank also released loan-loss reserves for the second quarter in a row, a sign that defaults won’t take as big a toll as previously expected.

Still, the firm cautioned that uncertainty remains and that it wasn’t reducing the money set aside for credit card losses as it waits to see the impact of fiscal stimulus efforts. JPMorgan shares fell 0.67 per cent to US$140.18 at 9:52 a.m. in New York trading.

“The bridge has been strong enough -- the question that remains is, is the bridge long enough,” Chief Financial Officer Jennifer Piepszak said, referring to the impact that stimulus has had. And while the recent package is cause for optimism, there’s still a lot of uncertainty. “We have to get through the next three to six months.”

JPMorgan’s earnings suggest the clouds are starting to lift on the banking industry, and hint at what’s to come when the rest of Wall Street reports results later Friday and early next week. With vaccines raising hopes that the pandemic could ease in coming months, some analysts are predicting the industry’s profits will rebound enough in 2021 to undo last year’s dive.

While the bank’s leaders said that risks remain, they aren’t slowing down on investments for growth. JPMorgan boosted its spending on new projects by about 24 per cent to US$12.4 billion, prompting several questions from analysts about increasing expenses while the virus rages. The bank is planning to hire more bankers, expand its consumer and commercial businesses into new markets and spend more on technology.

The bank said it could repurchase as much as US$4.5 billion of shares this quarter after the Fed lifted an industry ban on stock buybacks, but Chief Executive Officer Jamie Dimon has long said he’d rather funnel excess capital toward improving the firm.

“I would love to spend more on investments,” Dimon said on a call with analysts Friday. “It’d be the best and highest possible use of our capital.”

Record Haul

The fourth-quarter haul lifted JPMorgan’s annual profit to US$29 billion in a year that saw unprecedented surges in unemployment and economic disruptions tied to pandemic lockdowns. That was more than any other major U.S. bank has earned in any year.

The firm’s Wall Street unit generated the most profit and revenue it ever has in a fourth quarter, capping off a record year for the business that has helped prop up a consumer-lending division dealing with business closures and swelling unemployment rolls. JPMorgan’s traders generated US$5.9 billion in the last three months of the year thanks to strength in credit, currencies, emerging markets and equity derivatives trading, among other pockets.

That marked a 20 per cent jump in revenue from a year earlier, matching the pace Dimon the business was on in December. JPMorgan’s investment bankers posted a 34 per cent jump in fees for providing merger advice and underwriting stock and bond offerings.

The strength of the Wall Street businesses helped profit rise 42 per cent to US$12.1 billion. Analysts were expecting a 4 per cent drop.

The bank’s stock was up 11 per cent this month through Thursday, after a drop of almost 9 per cent in 2020.

In releasing almost US$3 billion of its credit reserves, far more than analysts had predicted, JPMorgan is signaling more optimism about the outlook for the economy. The bank said in October that it didn’t expect material losses in its consumer portfolio to show up until the second half of 2021. Net charge-offs fell 11 per cent from the third quarter to US$1.05 billion.

“While positive vaccine and stimulus developments contributed to these reserve releases this quarter, our credit reserves of over US$30 billion continue to reflect significant near-term economic uncertainty and will allow us to withstand an economic environment far worse than the current base forecasts by most economists,” Dimon said in a statement Friday.

JPMorgan said US$24.2 billion, or 2.9 per cent, of the loans in its consumer portfolio were still in payment deferral at the end of the fourth quarter, down from US$29.3 billion in the previous period. Most were residential real estate loans. It said that 91 per cent of the accounts that exited payment deferral were current on their payments.

Other highlights:

• The bank generated US$13.3 billion of net interest income, 6 per cent less than last year. That brought the full-year metric to US$54.5 billion, below the bank’s guidance of US$55 billion. JPMorgan boosted its outlook for 2021 NII to US$55.5 billion from the US$54 billion outlook provided in December.
• Expenses fell to US$16 billion from US$16.3 billion in the same period last year. Analysts predicted the metric would be flat. The bank increased its expense outlook for 2021 to at least US$68 billion, having previously guided for US$67 billion of expenses this year.
• The bank said it would spend US$900 million more on technology investments this year than it did last year to “improve customer experiences” and boost data analytics, A.I. and cyber capabilities.