JPMorgan Posts Record Revenue and 52 Percent Profit Jump

The logo for JPMorgan Chase & Co. appears above a trading post on the floor of the New York Stock Exchange in New York on Aug. 16, 2019. Richard Drew/AP Photo

JPMorgan Chase posted record profits and an overall boost in revenue in the first quarter, in the face of recent turmoil in the banking sector last month.

The better than expected April 14 earnings report beat most analysts’ estimates for the quarter, as depositors placed their money into the larger banks in the wake of the industry’s crisis.

The bank saw “significant new account opening activity” and deposit inflows, according to CFO Jeremy Barnum.

Wells Fargo and Citigroup also saw positive earnings report last week.

JP Morgan’s diversified businesses and trillions of dollars in assets also cushioned it from the crisis that slammed regional and smaller lenders.

America’s largest bank has been watched closely for signs on how the industry is faring, after a series of bank runs led to the collapse of Silicon Valley Bank and Signature Bank in early March.

JPMorgan played a major role in propping up First Republic, which faced a similar fate, by leading efforts to inject it with $30 billion in liquidity.

JP Morgan Surpassed Expectations During Banking Crisis

The banking giant announced a 52 percent boost in overall profits to $12.62 billion, or $4.10 per share, in the first quarter.

This included $868 million in losses on securities, but profits rose 22 cents, when earnings were not taken into account, to $4.32 per share after adjustments.

JP Morgan gained $50 billion in deposits at the end of March, while the rest of the industry saw a 3 percent decline in the first three months of 2023.

The lender’s fixed income trading business also posted $5.7 billion in profits, but equities trading revenue was at $2.7 billion, which was below earlier estimates.

The inflows of liquidity showed “an intra-quarter reversal of the recent outflow trend as a consequence of the March events,” Barnum said.

However, JPMorgan saw a 7 percent decrease in total deposits from a year ago to $2.38 trillion, but the recent inflows allowed deposits to climb by 2 percent when compared with the previous quarter.

Meanwhile, the JP Morgan CFO told shareholders that the bank had increased its forecast for net interest income to $81 billion this year, excluding profits from markets, from an earlier $74 billion.

The Federal Reserve’s hawkish interest rate policies boosted the lender’s net interest income last quarter by 49 percent to $20.8 billion, causing companywide revenue to rise 25 percent to $39.34 billion.

Barnum explained that the boost was mostly driven by expectations that the lender would have to pay less to depositors later this year if the Fed cuts rates.

Dimon Optimistic on Bank Industry Health

Although the banking sector crisis is far from over, JP Morgan CEO Jamie Dimon expects the disruptions caused by the bank failures last month to eventually pass.

“The U.S. economy continues to be on generally healthy footings—consumers are still spending and have strong balance sheets, and businesses are in good shape,” CEO Jamie Dimon said in a release.

“However, the storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks,” he explained, adding that the industry could rein in lending as banks become more cautious ahead of a likely recession.

JPMorgan put aside loan loss provisions of $2.3 billion, a 56 percent increase from last year, despite Dimon’s prediction that a recession “may still be pushed off a little bit.”

“You still see sticky inflation and then in front of us issues like higher rates, the war in Ukraine—those are still substantial concerns,” he said.

Although JP Morgan saw growth in earnings, the overall investment banking sector saw revenue tumble by 24 percent to $1.6 billion, as IPO markets started to slacken.

“Our pipeline is relatively robust,” but is still “sensitive to market conditions and the economic outlook,” Barnum said.

“We expect the second quarter and the rest of the year to remain challenging,” he added.

JP Morgan’s retail customers have been slow to pull their money out until recently, unlike its commercial clients, who have been pulling deposits for the past year as interest rates rose.

Retail clients are now trying to gain higher yields, causing deposits in the bank’s retail banking division to drop 4 percent in the first quarter.

Bank Deposits And Loan Markets Still Shaky

Despite a surge of new deposits in the aftermath of the recent bank failures, Barnum warned that the bank could see outflows in the future.

“It’s a competitive market and it’s entirely possible that people temporarily come to us, and then over time, decide to go elsewhere,” Barnum explained, but that the new deposits were not a big factor in JPMorgan’s optimistic projection of a boost in revenue.

Dimon agreed, saying “there’s no pricing power that the bigger banks have.”

Analysts are still waiting to see if JPMorgan and other major U.S. banks will tighten lending standards ahead of an expected recession, which would weaken economic growth this year by making it harder for consumers and businesses to borrow money.

Dimon cautioned that although a banking crisis could cut off loans to businesses and impact consumer spending, the American economy is still robust for now.

Barnum added that while more customers are making late payments, delinquencies are not yet a problem.

The CFO also admitted that the industry could start reducing loans to the commercial real estate sector, but JPMorgan is not looking at changing its underwriting standards there any time soon.

Reuters contributed to this report.