JP Morgan profit eases fear of slowing economy

Largest US bank by assets showed strength across its businesses in the first quarter

JP Morgan’s revenue rose 4.7 per cent to €26.4 billion. Photograph: Reuters

JP Morgan’s revenue rose 4.7 per cent to €26.4 billion. Photograph: Reuters

 

JP Morgan posted a better-than-expected quarterly profit on Friday, easing fears that slowing economic growth could weigh on its results.

The largest US bank by assets showed strength across its businesses in the first quarter, driven by what chief executive Jamie Dimon described as solid growth in the US economy, moderate inflation and strong consumer and business confidence.

US bank stocks have underperformed the broader market in recent months on fears of an impending recession, with economists and investors citing concerns over a flattening yield curve and slowing housing market. But bank executives have downplayed concerns, pointing to continuing loan growth.

Loans in JP Morgan’s consumer banking division rose 4 per cent from a year ago. Overall revenue rose 4.7 per cent to $29.85 billion (€26.4 billion).

Optimistic

“We’ve been generally quite optimistic about the outlook for the economy,” chief financial officer Marianne Lake told reporters on a call to discuss the results. “It doesn’t diminish the fact that there are a number of risks out there. Right now we don’t see that playing out in the data.”

The bank’s net interest margin, a key measure of loan profitability, edged up only 0.02 per cent from the fourth quarter, a slower pace of improvement than in the two previous quarters.

Investors have been concerned that net interest margins may have peaked for the banks, since the Federal Reserve has signalled it is unlikely to raise short-term rates this year and the spread between short- and longer-term rates has narrowed.

Investors will be listening closely to what bank executives say about changes in their outlooks for interest margins in coming quarters, analyst Brian Kleinhanzl of Keefe, Bruyette & Woods wrote in a note ahead of the results.

There are other warning signs. JP Morgan’s commercial banking segment made a $90 million (€79 million) provision for credit losses in the first quarter primarily because of downgrades in the credit worthiness of what it called “select” commercial and industrial borrowers.

Fall

In the bank’s capital markets business, equity underwriting fell 13 per cent and bond trading revenues fell 8 per cent from the year ago quarter. Bank executives had signalled earlier in the quarter that capital markets revenue could fall by a greater amount.

Shares of the bank were up 3.1 per cent in early trading.

Analysts had expected revenue of $28.44 billion (€25.16 billion), according to IBES data from Refinitiv.

JP Morgan’s results kick off earnings for the big banks and are closely watched by investors for cues on the health of the US economy and the financial system.

The bank said net income rose to a record $9.18 billion (€812 billion), or $2.65 per share, in the quarter ended March 31st, from $8.71 billion (€7.71 billion), or $2.37 per share, a year earlier.

Net interest income rose 8 per cent to $14.60 billion (€12.9 billion), boosted by interest rate increases since the first quarter of last year.

Analysts had estimated earnings of $2.35 per share, according to IBES data from Refinitiv. – Reuters