JPMorgan Chase & Co (JPM.N) ended the year with a better-than-expected quarterly profit, helped by cost cuts and a smaller legal bill, and expressed confidence about its businesses in 2016 despite a grim start for stocks and energy prices.
The biggest U.S. bank by assets - the first big lender to report since the Federal Reserve raised its key interest rate in mid-December - said it expected net interest income to rise by about $2 billion as a result of the hike and loan growth.
JPMorgan forecast incremental increases in the amount of money set aside for losses on loans to the energy sector in the coming year, but said oil prices would need to remain at current levels for an extended period for provisions to be significant.
The bank's shares rose as much as 3.5 percent in morning trading. Other bank shares also rose, as investors took JPMorgan's results and positive noises about the U.S. economy as indicators of the health of the sector.
U.S. banks, like their global counterparts, have had a tough year as falling oil prices and worries about slowing growth in China contributed to weakness in credit markets.
However, Chief Executive Jamie Dimon told analysts that investors were adjusting to China's slowdown, and said there were winners and losers in the commodity rout.
"Hopefully this will all settle down and it's not the beginning of something really bad," he said.
"We're not forecasting a recession. We think the U.S. economy looks pretty good at this point."
Legal charges and the costs of meeting stricter capital requirements have also weighed on the lenders. And U.S. interest rates remain near historic lows even after the Fed rate hike.
That has meant that cost cutting - the one thing banks can best control - has become a main driver of profits.
Two of the bank's five business lines achieved profit increases - investment banking by 80 percent and consumer and community banking, the largest contributor to net income, by 10 percent. Income from commercial banking fell 21 percent.
JPMorgan's total non-interest expenses fell 7.4 percent to $14.26 billion in the quarter, while legal expenses fell to $644 million from $1.1 billion.
"We are very happy with our expense story for the year," Chief Financial Officer Marianne Lake said on a call with reporters.
Total compensation expenses fell 2.4 percent to $6.69 billion as the bank's employee count fell to 234,598, from 241,359 at the end of 2014.
RECORD ANNUAL EARNINGS
JPMorgan's net income rose 10.2 percent to $5.43 billion, boosting annual profit to a record $24.44 billion.
On a per-share basis, the bank earned $1.32, handsomely beating the average analyst estimate of $1.25 per share.
Total net revenue rose about 1 percent to $23.75 billion, topping the average estimate of $22.89 billion.
Revenue from fixed-income trading, usually JPMorgan's most volatile business, fell 3 percent to $2.57 billion.
The bank's balance sheet shrank 2.7 percent on a sequential basis to $2.35 trillion as of the end of December.
Like other big banks, JPMorgan has been shedding assets to appease regulators, who fear its size could pose a risk to the financial system in the event of a failure.
Provision for bad loans rose 49 percent to $1.25 billion.
JPMorgan's shares were trading at $58.82 in early afternoon trading. The stock was the only one among the six big U.S. banks to finish 2015 in positive territory, rising 5.5 percent.
But through Wednesday the shares had fallen 13.2 percent this year, the second worst performer in the Dow Jones industrial average.
Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N), the third and fourth biggest U.S. banks, report on Friday.
(Reporting by Sweta Singh; Additional reporting by Richa Naidu and David Henry; Editing by Ted Kerr)