JPMorgan Chase  (JPMFree JPMorgan Chase Stock Report) one of the largest banks in the United States and a component of the Dow 30, turned in disappointing results for the final quarter of 2018. The stock slipped modestly on the news.

The company reported December-quarter share net of $1.98 and full-year 2018 results of $9.00. Earnings were significantly better than the $1.76 logged in the final quarter of 2017 and full-year 2017 results of $6.87, both adjusted for a $0.69-a-share charge for the upfront impact of the Tax Cuts and Jobs Act. However, earnings in the December quarter fell short of consensus expectations and our estimate of $2.30 a share, largely owing to an 18% decline in fixed-income trading revenue, reflecting tough market conditions near the end of last year.

Net interest income advanced 10%, supported by healthy credit card and commercial loan growth, and higher interest rates. Noninterest income rose 3% year to year but declined 12% compared to the September period. In addition to the decline in fixed-income revenues, the weak market conditions slightly depressed asset management income. Mortgage revenues fell as well.

Operating expenses rose 6%, reflecting technology spending and costs related to building up businesses, including the costs of opening offices in a couple of new cities, like Philadelphia. Too, legal benefits reduced expenses by $207 million in the final quarter of 2017 compared to only $18 million in the 2018 December term.

Although JPMorgan remains in good shape with regard to credit quality, and loan losses declined in the quarter, the company set aside larger provisions for losses on credit card loans, reflecting strong growth in the card portfolio in the past year. Finally, results in the December quarter and the full year benefited from a lower tax rate due to tax reform, which took effect at the start of 2018, and stock repurchases.

By business segment, Consumer & Community Banking profits advanced 53%, powered by healthy loan growth, higher interest rates, and higher interest-rate increases. Corporate & Investment Banking profits fell 15%, mostly due to the weakness in markets income. Commercial Banking profits increased 8%, but would have slipped slightly excluding a charge for leased equipment recorded in the year-earlier period. Asset & Wealth Management income declined 8%, driven by lower market levels. And the Corporate segment logged a much smaller loss, as higher interest rates boosted treasury income.

Looking ahead, management expects net interest income in the opening quarter of 2019 to roughly match the 2018 December-period tally since the March period contains fewer days. Too, the company may derive less incremental benefit from future interest-rate hikes than in the past year. Equity and fixed-income market conditions may remain volatile, but management indicated that market conditions are calmer and the investment banking pipeline remains strong. The company has a fairly diverse mix of businesses than generate fee-based revenues, and we expect noninterest income to improve. The company expects expenses to increase at a mid-single-digit pace in the March quarter, but it aims to lower its expense-to-revenue ratio in 2019 from about 57% to 55%. Credit costs probably will increase moderately. In all, we are tentatively lowering our share-net estimate for 2019, from $9.65 to $9.10.

From an investment perspective, JPMorgan shares are mostly of interest for income. But the stock doesn't stand out for appreciation potential to 2021-2023, in spite of its pullback last year.

About The CompanyJPMorgan Chase & Co. is a global financial services company offering a variety of services with operations in over 60 nations. As of 12/31/17, the company had 5,130 branches. Operational divisions include investment banking, treasury & securities services, asset management, commercial banking, retail financial services, card services, and private equity investment. The company had previously merged with Washington Mutual in September, 2008, Bank One in July, 2004, and Chase Manhattan in the final month of 2000.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.