JPMorgan (JPM  ) is considered the highest-quality, diversified bank by many measures - reputation, executive leadership, and stock price performance. Now, its fourth quarter earnings are also justifying this moniker.

The company beat earnings and revenue expectations with outperformance in multiple segments including trading, investment banking, and retail banking. Notably, the company was able to reduce its loan-loss reserves due to expectations of a lower default rate as it upped its assessment of the economy due to the stimulus and vaccine. Previously, JPMorgan had set aside nearly $30 billion in reserves during the depths of the crisis.

Inside the Numbers

Now, those reserves are a tailwind to earnings. In Q4, JPMorgan was able to reduce reserves by $2.9 billion. Overall, it posted earnings of $3.79 a share, topping estimates of $2.62 per share. $0.72 came from reserves. In terms of revenue, JPMorgan reported $30.16 billion which was higher than estimates of $28.7 billion.

In the conference call, CEO Jamie Dimon said that the company continues to have $30 billion in credit reserves to guard against another downturn. Given expectations of improving growth, these reserves should continue to be a tailwind for 2021 and 2022 earnings. Another helpful factor is the Federal Reserve's recent decision to limit dividend hikes and share buybacks. These measures should also boost share prices.

While the coronavirus impacted loan demand, trading continues to drive growth in the company due to markets seeing increased trading activity, high levels of debt issuance, and a strong IPO market. Banking results should improve also due to the steepening yield curve which tends to increase loan spreads.Stock Price Outlook

JPMorgan shares slipped 1.3% after the earnings report despite the strong report largely due to broad market weakness. However, the stock has been exceptionally strong as it's up nearly 40% over the last ten weeks. It's up 90% from the March lows, and is 5% off all-time highs.

Its business has remained in good shape despite the coronavirus due to strength in its trading division. Now, it seems like banking will also swing into growth mode due to the improving economy, steepening yield curve, and increased loan demand.

It seems that financials are ready to lead the market higher after basically underperforming since the financial crisis. The best opportunities come with multiple-expansion and earnings growth. Both seem likely for bank stocks in the coming months.