JPMorgan Chase posted record first-quarter earnings that beat analysts’ expectations, with net interest income jumping nearly 50% from a year ago on the back of higher rates.
Here’s what the company reported:
- Adjusted earnings: $4.32 per share vs. $3.41 per share Refinitiv estimate
- Revenue: $39.34 billion, down from $36.19 billion
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Shares of the bank jumped 6.1% in premarket trading.
“The U.S. economy continues to be on a generally sound footing – consumers continue to spend and have strong balance sheets, and businesses are in good shape,” CEO Jamie Dimon said in the statement.
“However, the storm clouds that we have been watching for over the past year remain on the horizon, and turbulence in the banking sector adds to these risks,” he said, adding that banks will limit likely their lending as they become more conservative ahead of an eventual downturn.
JPMorgan, the largest U.S. bank by assets, will be watched closely for clues about how the industry fared after two regional lenders collapsed last month.
Analysts expect a mix of contradictory trends. For example, JPMorgan likely benefited from an influx of deposits after Silicon Valley Bank and Signature Bank experienced fatal bank runs.
But the sector has been forced to repay deposits as customers shift their holdings to higher-yielding instruments like money market funds. This will likely dampen banks’ gains as interest rates rise as part of the Federal Reserve’s efforts to control inflation.
The flow of deposits through US financial institutions is the top concern for analysts and investors this quarter. Indeed, smaller banks came under pressure last month as customers sought the perceived security of megabanks, including JPMorgan and Bank of America. But overall, deposits are leaving the regulated banking system as a whole as customers realize they can earn higher returns outside of checking and savings accounts.
Another key question will be whether JPMorgan and others tighten lending standards ahead of an expected U.S. recession, which could constrain economic growth this year by making it harder for consumers and businesses to borrow money. .
Banks have started to build up more loan loss provisions on expectations of a slowing economy later this year, which could weigh on results. JPMorgan is expected to post a provision for credit losses of $2.27 billion, according to StreetAccount’s estimate.
Wall Street could provide little help this quarter, with investment banking fees expected to remain subdued thanks to the still-closed IPO market. Chief Financial Officer Jeremy Barnum said in February that investment banking revenue was heading for a 20% decline from a year earlier, and that exchanges were also trending “a bit worse”.
Finally, analysts will want to hear what Dimon has to say about the economy and his expectations for the evolution of the regional banking crisis. JPMorgan played a pivotal role in supporting a client bank, First Republicwhich faltered last month, in part leading efforts to inject it with $30 billion in deposits.
JPMorgan shares are down about 4% this year, outpacing the 31% drop in the KBW banking index.
Wells Fargo And Citigroup are expected to release results later Friday, while Goldman Sachs and the Bank of America report on Tuesday and Morgan Stanley announces its results on Wednesday.
This story is developing. Please check for updates.