Rising interest rates increased net interest income for JPMorgan Chase. (Representative)
New York:
Asia’s Nikkei reported that top US banks posted healthy quarterly profits on Friday, beating analyst forecasts as the sector’s biggest names emerged free of turmoil.
The country’s largest bank JPMorgan Chase reported a net profit of $12.6 billion in the first quarter of 2023, up 52 percent from a year earlier. Earnings per share rose 56 percent to $4.10.
The results provided the first indication of how JPMorgan and its peers have fared since the failures of mid-sized lenders Silicon Valley Bank and Signature Bank in March.
Citigroup’s $4.6 billion and Wells Fargo’s $5 billion profits also improved in the first quarter of 2022, as did earnings per share for both banks, Asia Nikkei reported.
Shares of JPMorgan Chase rose more than 7 percent. Citigroup rose nearly 5 percent, while Wells Fargo’s stock was little changed.
The March turmoil, which has yet to see new US bank failures, drew depositors to larger financial institutions.
Total deposits fell 7 percent at JPMorgan Chase and 8 percent for Wells Fargo, while Citigroup deposits held steady. But according to Asia Nikkei, JPMorgan deposits increased from the fourth quarter.
“As you would expect, we saw significant new-account-opening activity and meaningful deposit and money market fund flows, most significantly in commercial banks, business banking and AWM [asset and wealth management]JPMorgan Chief Financial Officer Jeremy Barnum said on the earnings call, shortly adding that the bank estimated it had retained about $50 billion of these deposit flows.
Barnum said the bank’s full-year outlook for net interest income — the difference between revenue from interest-bearing assets and expenses from interest-bearing liabilities — still assumes “modest deposit outflows.”
Rising interest rates led to a huge increase in net interest income for JPMorgan Chase, which jumped 49 percent year-on-year, Asia Nikkei said, while net interest income for Wells Fargo was up 45 percent.
But there were signs of disquiet for the coming months, particularly the prospect of losses on lending to commercial real estate, which is under pressure from higher interest rates, Asia Nikkei said. JPMorgan increased its provision for credit losses by 55 percent, and Wells Fargo added $643 million to its allowance for credit losses, driven heavily by commercial real estate loans for offices.
On the outlook for US interest rates, JP Morgan CEO Jamie Dimon said that “people need to be prepared.” “Let them pray they don’t go up,” he said. “They should prepare to go over them. And if they don’t, seriously.”
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