JPMorgan records quarterly earnings thanks to interest rate hike

JPMorgan Chase’s first-quarter results beat past expectations and set the pace for other banks to release earnings in the next few weeks.

JPMorgan profit rose 52% year over year to $12.6 billion, or $4.10 a share, beating forecasts of analysts polled by FactSet, which had expected the bank to earn $10.2 billion, or $3.41 a share. Revenue was a record $38.3 billion, up 25% from $36.2 billion a year ago. The better-than-forecast results were largely a result of JPMorgan net interest income hitting $20.9 billion—a 49% increase from last year—as a result of the Federal Reserve’s rapid rate hike path over the past year.

Shares rose 5.8% to $136.50 in premarket trading.

The blowout quarter came as Wall Street was nervous about banks in light of the collapse of Silicon Valley Bank and Signature Bank last month. Despite these headwinds, JPMorgan sounded confident about its ability to navigate challenging times.

“Our years of investment and innovation, vigilant risk and controls architecture, and strong balance sheet have enabled us to generate these returns, and serve as a pillar of strength in the banking system and stand by our clients in a period of heightened volatility and uncertainty.” Jamie Dimon, Chief Executive Officer, JP Morgan said.

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However, in light of a tougher macroeconomic picture, JPMorgan increased its allowance for loan losses to $2.3 billion, a roughly equal split between net charge-offs and its reserves.

JP Morgan’s consumer and community banking division was one of the biggest drivers of the bank’s results, with profits up 80% over last year. Investment banking and trading revenue—areas that have been a boon for JP Morgan during the pandemic’s easy-money era—were broadly in line with last year’s results.

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While Wall Street will take comfort in JPMorgan’s results, more emphasis will be placed on the economic outlook given by Dimon and other executives during Friday’s earnings call. In his annual letter to shareholders published last week, JP Morgan Chief Executive Jamie Dimon said the recent bank failures had “exposed some weaknesses in the system” but struck a somewhat more optimistic note compared to the 2008-09 financial crisis.

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“We’ve had 10 years of house and stock price appreciation, and even if we go into a recession, consumers will enter it in much better shape than they were during the Great Financial Crisis. Finally, supply chains are recovering, businesses are much healthier and loan losses are much lower,” Dimon wrote.

Citigroup ( C ) and Wells Fargo ( WFC ) also report Friday. Morgan Stanley ( MS ), Goldman Sachs ( GS ) and Bank of America ( PAC ) report first-quarter results next week.

Write to Carleton English at [email protected]

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