JPMorgan Chase reports record earnings thanks to higher interest rates

JPMorgan Chase posted record first-quarter earnings that beat analysts’ expectations. Net interest income increased by almost 50% year-on-year due to higher interest rates.

Adjusted earnings per share: $4.32 compared to Refinitiv’s forecast of $3.41 per share.

Revenue: $39.34 billion vs. $36.19 billion

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The bank said earnings rose 52% to $12.62 billion, or $4.10 a share, in the first three months of this year. This figure includes losses incurred as a result of trading in securities of $868 million. Excluding these losses, earnings increase by 22 cents per share, resulting in adjusted earnings of $4.32 per share.

The company’s revenue rose 25% to $39.34 billion, driven by a 49% increase in net interest income to $20.8 billion, driven by the Federal Reserve Bank’s most aggressive rate hike in decades.

Shares of the financial giant Wall Street rose more than 5% in premarket trading on Friday.

“The US economy continues to be in a relatively healthy state – consumers are still spending and have strong financial balances, and business is in good shape,” said the CEO. Jamie Dimon in release.

“However, the storm clouds we’ve been seeing over the past year are still on the horizon and banking problems are adding to those risks,” he said, adding that the industry could hold back on lending as banks become more conservative ahead of a possible downturn. .

The largest bank in the US by assets is closely monitoring how the industry handled the collapse of two regional banks last month. Analysts had expected JPMorgan to benefit from the influx of deposits after Silicon Valley Bank and Signature Bank faced a fatal outflow of deposits due to the panic.

At the same time, clients are pulling money out of the regulated banking system as they realize they can earn higher returns from money market funds.

That seemed to be the case at JPMorgan as well, which saw a 7% drop in total deposits from a year ago to $2.38 trillion, slightly better than analysts polled by StreetAccount had forecast of $2.31 trillion.

While corporate clients have withdrawn deposits over the past year due to rising rates, retail clients have been much slower. For example, retail deposits at JPMorgan rose 3% in the fourth quarter.

Now, Main Street clients seem to be looking for higher yields, and deposits at JPMorgan’s massive retail banking division were down 4% in the first quarter.

Banks have also begun to allocate more provisions for loan losses in anticipation of a slowdown in the economy at the end of the year. JPMorgan recorded $2.3bn in borrowing costs, roughly in line with StreetAccount’s expectations, as it created $1.1bn in provisions and included $1.1bn in NPLs on its balance sheet.

JPMorgan’s fixed income business also helped the bank beat expectations, earning $5.7 billion, $400 million above market expectations. Share trading revenue of $2.7 billion came in below an estimate of $2.86 billion.

CFO Jeremy Barnum (Jeremy Barnum) said in February that investment banking revenue will be down 20% from a year earlier and trading will also go “a little worse”.

Analysts will want to hear what Dimon has to say about the US economy and his expectations for how the regional banking crisis will play out.

JPMorgan has been instrumental in propping up First Republic Bank, which faltered last month, in particular by spearheading efforts to inject $30 billion into it.

Another key question will be whether JPMorgan and other banks are tightening lending standards ahead of an expected US recession, which could dampen economic growth this year by making it harder for consumers and businesses to borrow.

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