For the most part JPMorgan had about as best of a quarter it could possibly have as the company was able to top the consensus estimate figure for both EPS and revenue for Q4’15. The bank reported $23.747 billion in revenue, and $1.32 in EPS. This compared to the consensus estimate of $22.89 billion revenue, and $1.25 EPS. The issues with regards to E&P lending were heightened going into the bank’s quarterly earnings among some of the analyst consensus, and quite frankly, the sector that seems the most difficult for building financial models is ironically banks. Even though the analysts working at banks are pretty familiar with the business model, and the relative risk exposure of assets among the GSIFI banks, the degree to which mining and oil was going to impact JPMorgan amounted to a couple hundred million dollars in added loan reserve losses. In the investment bank division, the bank set aside an additional $81 million for loan reserve losses primarily reflecting oil with approximately 25% of the exposure pertaining to miners. Of course we’re a little early into the cyclical trough parts of an energy cycle, so we probably won’t see a wave of defaults among the miners and producers assuming oil prices remain below the $40 level where the vast majority of projects aren’t really all that profitable. Another $100 million was set aside in the commercial banking segment, which was hardly a needle mover, so the credit exposure to energy and mining was rather limited on JPM’s front. Given the fact we’re so early into a bearish cycle for commodities the rate of defaults will be limited, but assuming prices across commodities remain depressed for a couple more years, the thesis around E&P and mining lending will change quite considerably. Nonetheless the consumer remained strong, and JPMorgan is very close to its targeted CET 1 Ratio of 12%, which the bank reported 11.6% as of its most recent quarterly. The real catalyst to the bank’s earnings was the consumer banking segment, which reported $2.4 billion in contribution to the banks net income, which compared to prior year at $228 million. The bank anticipates that consumer banking will remain the bright spot going into FY’16 as the consumer mortgage business continues to recover with the portfolio heavily centered around Jumbo Mortgages, which limits exposure to agency backed mortgages. The higher quality portfolio in conjunction with falling non-interest expenses drives both top and bottom line expansion. The company expects the higher interest rate environment to improve spreads on lending, which has some favorable implications given the flat sequential comps in interest expense ratios. However, the carry forward of tax benefits from prior recorded losses through the 2008 period will begin to roll off, so the tax rate will likely increase incrementally going forward. We don’t know exactly what the effective tax rate will look like, but the current 17.18% TTM effective tax rate isn’t sustainable. Without the carry forwards of tax losses in prior years, the bank would have an effective tax rate around 30%, which is why earnings management will center more heavily around the spread between interest income and interest expense along with further reduction to overhead and headcount. The banks spread on interest earned and interest expense remained relatively stable, which is why the earnings from the consumer banking segment came primarily as a result of higher loan orginations and was partially mitigated by the incremental increase to firm wide capital. TheCET1 ratio increased to 11.6% from 11.4% sequentially. The bank has a target of reaching 12% CET1 ratio, which is where RWA levels will begin to stabilize and organic deposit growth should translate directly into future loan originations. In other words, a lot of mixed signals coming out of this report because investment banking, and asset management remained flat. The corporate banking segment will likely struggle in a weak equity environment in the first half, but growth in consumer and business banking in conjunction with expense management should mitigate some of the headwinds. I haven’t arrived at my own intrinsic value estimate, but I still believe the bank is on track to reaching 10% to 15% net income growth over the next three years despite the mixed environment for the various reporting segments. Because banks tend to do better in the last legs of a cyclical economic recovery, allocation should be weighted towards high-quality financial names like JPM, and since the growth in loans is backed by heightened capital reserve ratios, I feel like the cyclical recovery in housing and lending is more sustainable with fears over a bubble not substantiated. The recovery in lending will likely continue for several more years. So, I’m going to say JPM is still a buy, and while broader fear mongering among experts has the market pinned at lower levels, I find it hard to imagine a broader market correction will bring the S&P 500 into a 20%+ sell-off territory without visible weakness in lending among the major 4 consumer banks.