J.P. Morgan US sales booming, leads Germany’s leverage issuance

J.P. Morgan has reported a net income of US$10.4 billion for the fourth quarter of 2021, down 14%, driven by higher non-interest expense, from the prior year quarter.

The corporate & investment bank (CIB) posted net revenue of US$11.5 billion, an increase of two percent on Q4 2020.

Markets revenue was US$5.3 billion, down 11%, while fixed income markets revenue, at US$3.3 billion, decreased by 16%, driven by a challenging trading environment in rates, as well as lower revenues in credit and currencies & emerging markets compared to a strong prior year.

It was a particularly strong year for both investment banking and markets - Jeremy Barnum, CFO

Revenues for the equity markets business, at US$2 billion, were down two percent as continued strength in prime was more than offset by modest weakness in derivatives. For the full year, equity's revenue was US$10.5 billion, up 22% and an all-time record, according to chief financial officer Jeremy Barnum (pictured), speaking during the earnings call on 14 January.

‘It was a particularly strong year for both investment banking and markets, and looking ahead, we do expect some modest normalisation of the wallet in 2022,’ said Barnum, adding that for purposes of the first quarter in investment banking, the overall pipeline remains ‘quite robust’.

J.P. Morgan had a 12.1% share of the US structured products market in Q4 2021, making it the third most active issuer in the quarter, behind Morgan Stanley (14%) and Citi (12.6%), according to SRP data.

The bank collected US$3 billion from 1,390 products between 1 October and 31 December, an increase of 70% in sales volume YoY (4Q 2020: US$1.7 billion from 835 products).

Its sales for full year 2021, at US$12 billion (from 5,072 products), were the highest achieved by the bank since the launch of the SRP US database in 2005, and up 50% compared to FY2020 (US$8 billion from 3,888 products).

Equities dominated the underlyings in Q4, with products linked to a single stock responsible for both the highest issuance (354 products) and the largest volumes (US$853m), followed by products linked to an index basket (US$768m from 339 products). The former included the trigger autocallable contingent coupon yield notes on the common stock of Apple – the bank’s best-selling product for the quarter (US$31.4m).

Some 220 products (US$359m) were tied to a single index, including 71 structures (US$73m) on the MerQube US Tech+ Vol Advantage Index, and 64 products (US$128m) linked to the S&P 500.

A further 94 products that sold a combined US$228m were linked to exchange-traded funds (ETFs). Of these, the largest volumes (US$46m) were achieved by eight products linked to the SPDR S&P 500 ETF Trust while the most seen ETF by issuance was the ARK Innovation ETF (27 products).

The majority of products issued in the quarter were available via affiliated or unaffiliated broker-dealers, but the bank also collaborated with other providers for the distribution of its products, including First Trust Portfolios (145 products), Incapital (81), Raymond James (49), UBS (48), Morgan Stanley Wealth Management (31) and Goldman Sachs Private Banking (25).

Outside of the US, the bank mainly focused on the issuance of listed certificates in Germany, where it was the number one manufacturer of leverage products by issuance – ahead of Société Générale and BNP Paribas – launching 127,707 new turbos in the quarter (Q4 2020: 134,252 products).

The local Dax was the preferred index for the German investor (39,005 products) followed by Dax/Xdax (12,074) and Nasdaq 100 (10,414). Currency pairs such as the EUR/USD (4,447) and USD/JPY (1,689) were also in demand, as were precious metals gold (4,393) and silver (1,646) while Amazon was the most popular share (1,645)

A further 112 flow products, mainly bonus- and discount certificates were also issued in Germany.

Click the link to read the full J.P. Morgan Q4 2021 results, presentation and financial supplement.

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