JPMorgan Chase profits jump 52% amid banking turmoil

RHONDELLA: WELCOME BACK. UNCERTAIN FINANCIAL TIMES FEELING EVEN MORE UNCERTAIN DUE TO THE INTEREST RATES STILL ON THE RISE. THESE AREN’T ALWAYS THE EASIEST TOPICS TO UNDERSTAND, SO JOINING US NOW TO HELP US ALL BREAK IT DOWN IS BANKRATE.COM U.S. ECONOMY REPORTER SARAH FOSTER. GOOD MORNING, THANK YOU FOR JOINING US AGAIN. >> THANKS FOR HAVING ME BACK. JENNIFER: WE SPOKE WITH YOU THREE WEEKS AGO ABOUT THESE RISING INTEREST RATES THAT KEEP GOING UP. ARE YOU SURPRISED THAT THE FEDERAL RESERVE DECIDED TO RAISE RATES BY ANOTHER QUARTER PERCENT THIS LAST WEEK? >> PROBABLY ONE OF THE BIGGEST HEADACHES, BUT ONE OF THE BIGGEST REPORTS FOR FEBRUARY, PRICES ARE STILL ELEVATED AND THE FED UNDERSTANDS THE MAIN OBJECTIVE IS MAINTAINING PRICE STABILITY. WHAT I’VE BEEN TELLING PEOPLE AND WHAT ECONOMISTS HAVE BEEN SAYING IS THAT THIS DECISION TO RAISE INTEREST RATES BY THAT SMALL AMOUNT, THAT IS ABOUT MEETING BOTH OF THESE CONCERNS IN THE MIDDLE. ON THE ONE HAND, YOU DON’T WANT TO CAUSE TOO MUCH PAIN FOR BANKS, BUT YOU ALSO WANT TO MAKE SURE THAT PRICES COME BACK A MUCH MORE SUSTAINABLE LEVEL. >> SINCE WE SPOKE A FEW WEEKS AGO, WE SEE TWO MAJOR BANKS COLLAPSE AND THE RIPPLE EFFECTS OF COUNTLESS OTHERS. WHAT DO YOU MAKE OF WHAT HAS HAPPENED? >> THE BOTTOM LINE THAT I LIKE TO TELL CONSUMERS IS THAT YOU SHOULD NOT BE PANICKING IF YOU PUT YOUR MONEY IN A BANK THAT IS PART OF THE FDIC, AND IF YOUR CASH FALLS WITHIN THE THRESHOLD. BUT THERE ARE SOME CONCERNS HERE ABOUT WHAT IS HAPPENING, SPECIFICALLY AT THESE MIDSIZE COMMUNITY BANKS, THAT THEY COULD WEIGH ON THE ECONOMY JUST A LITTLE BIT, NOT BECAUSE OF THESE FAILURES, BUT BECAUSE THESE REGIONAL-SIZED BANKS, THEY WANT TO MAKE SURE THEY RETAIN ENOUGH CASH ON HAND TO COVER ALL OF THE DEPOSITOR NEEDS. AND SO WE KNOW THAT THESE MIDSIZE BANKS, THEY REALLY MAKE UP A LARGE AMOUNT GOING INTO COMMERCIAL REAL ESTATE, EVEN FOR CONSUMER LENDING. THOSE LENDING STANDARDS, YOU CAN SEE A LITTLE BIT OF THAT ON THE ECONOMY. JENNIFER: TO FOLLOW-UP ON THAT, A POLL THIS PAST WEEK SHOWS THAT ONLY 10% OF AMERICANS HAVE A GREAT DEAL OF CONFIDENCE IN THE NATION’S BANKS AND FINANCIAL INSTITUTIONS RIGHT NOW. MORE THAN HALF THINK THE GOVERNMENT IS NOT DOING ENOUGH TO REGULATE BANKS AND FINANCIAL INSTITUTIONS. WHAT DO YOU THINK NEEDS TO BE DONE TO RESTORE TRUST IN THE INDUSTRY AT THIS POINT? >> WHAT WE DO KNOW HERE IS THAT TRUST IN THE BANKING SYSTEM IS THE BEDROCK FOR IT. WE CAN’T HAVE CONFIDENCE IN BANKS AND WE NEED TO HAVE CONFIDENCE IN BANKS AND ALSO A STRONG ECONOMY. WHAT WE ARE LIKELY GOING TO HEAR DISCUSSIONS ABOUT OVER THE NEXT FEW WEEKS, WE’VE ALREADY SEEN SOME REPRESENTATIVES POINT OUT THE IDEA OF DEPOSITS AT THE FDIC INSURANCE. JANET YELLEN KIND OF WALK THAT BACK A FEW DAYS AGO AND ADDRESSED AT THE CONGRESS. BUT I THINK WHAT YOU’RE GOING TO SEE HERE IS THAT THESE BANKING REGULATORS, THEY WANT TO MAKE SURE THAT ALL DEPOSITORS KNOW THAT THEIR CASH IS SAFE. THIS IS GOING TO BE A MAJOR AREA OF EMPHASIS FOR THEM GOING FORWARD. JENNIFER: SARAH FOSTER, THANK YOU AGAIN FOR YOUR INSIGHT

Updated: 12:13 PM CDT Apr 14, 2023

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JPMorgan Chase profits jump 52% amid banking turmoil

Updated: 12:13 PM CDT Apr 14, 2023

Editorial Standards ⓘ

JPMorgan Chase & Co. posted a 52% jump in its first-quarter profits, helped by higher interest rates, which allowed the bank to charge customers more for loans. The bank saw deposits grow noticeably, as businesses and customers flocked to the banking titan after the failure of Silicon Valley Bank and Signature Bank last month.With JPMorgan's strong results, as well as solid results from Citigroup and Wells Fargo on Friday, there seem to be few signs of potential trouble in the banking system — at least among the nation's biggest, most complex financial institutions."These were the most watched bank earnings announcements in over a decade, with market participants scouring the results looking for signs of cracks in the US banking sector. Those analysts looking for signs of the banking crisis were greatly relieved to not find any," said Octavio Marenzi, CEO of the consulting firm Opimas LLC, in an email.JPMorgan, the nation's biggest bank by assets posted a profit of $12.62 billion, compared to a profit of $8.28 billion in the same period a year earlier. On a per-share basis, the bank earned $4.10 a share, up from $2.63 a share a year ago, beating analysts' expectations.Most of the profit growth came from higher interest rates. The bank's net interest income was $20.8 billion in the quarter, up 49% from last year.JPMorgan grew deposits by $37 billion during the quarter, up to $2.4 trillion. Deposits at big banks had been falling for several quarters as consumers spent down their pandemic savings and businesses tapped into their stored cash to pay bills. But with the collapse of Silicon Valley Bank and Signature Bank in March, businesses have been withdrawing their funds from smaller banks and moving them into the larger banks, which are considered "too big to fail" and have an implicit government backstop.In a call with reporters, JPMorgan Chief Financial Officer Jeremy Barnum said most of the new deposits flowed into new business and company bank accounts opened in the past month. The new deposits reversed the flow of deposits exiting the bank for several quarters."What crisis?," analysts at UBS titled their report after JPMorgan, Wells and PNC reported their results.JPMorgan and CEO Jamie Dimon have been the industry's go-to problem solvers for banking issues for years now. After the failure of Silicon Valley Bank and Signature Bank, JPMorgan helped put together a consortium of other big banks to keep First Republic Bank from being next to fail. The group of banks put $30 billion in uninsured deposits into First Republic, which appears to have at least bought the midsize bank some time to repair its balance sheet and maybe find a buyer."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. 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," Dimon said in a statement.JPMorgan continued to benefit from consumers switching from saving to spending. Credit card spending rose 13% from a year earlier, and more customers are now keeping a balance instead of paying off their credit cards, so the bank is making money from processing the transactions as well as the interest off the balances.Meanwhile business in the bank's corporate and investment bank remains relatively quiet, as many businesses and investors are holding off making big decisions amid high inflation. Revenue from advisory fees were flat, while revenue from trading stocks and bonds were flat to down.JPMorgan shares rose more than 6% in early trading.

With JPMorgan's strong results, as well as solid results from Citigroup and Wells Fargo on Friday, there seem to be few signs of potential trouble in the banking system — at least among the nation's biggest, most complex financial institutions.

"These were the most watched bank earnings announcements in over a decade, with market participants scouring the results looking for signs of cracks in the US banking sector. Those analysts looking for signs of the banking crisis were greatly relieved to not find any," said Octavio Marenzi, CEO of the consulting firm Opimas LLC, in an email.

JPMorgan, the nation's biggest bank by assets posted a profit of $12.62 billion, compared to a profit of $8.28 billion in the same period a year earlier. On a per-share basis, the bank earned $4.10 a share, up from $2.63 a share a year ago, beating analysts' expectations.

Most of the profit growth came from higher interest rates. The bank's net interest income was $20.8 billion in the quarter, up 49% from last year.

JPMorgan grew deposits by $37 billion during the quarter, up to $2.4 trillion. Deposits at big banks had been falling for several quarters as consumers spent down their pandemic savings and businesses tapped into their stored cash to pay bills. But with the collapse of Silicon Valley Bank and Signature Bank in March, businesses have been withdrawing their funds from smaller banks and moving them into the larger banks, which are considered "too big to fail" and have an implicit government backstop.

In a call with reporters, JPMorgan Chief Financial Officer Jeremy Barnum said most of the new deposits flowed into new business and company bank accounts opened in the past month. The new deposits reversed the flow of deposits exiting the bank for several quarters.

"What crisis?," analysts at UBS titled their report after JPMorgan, Wells and PNC reported their results.

JPMorgan and CEO Jamie Dimon have been the industry's go-to problem solvers for banking issues for years now. After the failure of Silicon Valley Bank and Signature Bank, JPMorgan helped put together a consortium of other big banks to keep First Republic Bank from being next to fail. The group of banks put $30 billion in uninsured deposits into First Republic, which appears to have at least bought the midsize bank some time to repair its balance sheet and maybe find a buyer.

"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. 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," Dimon said in a statement.

JPMorgan continued to benefit from consumers switching from saving to spending. Credit card spending rose 13% from a year earlier, and more customers are now keeping a balance instead of paying off their credit cards, so the bank is making money from processing the transactions as well as the interest off the balances.

Meanwhile business in the bank's corporate and investment bank remains relatively quiet, as many businesses and investors are holding off making big decisions amid high inflation. Revenue from advisory fees were flat, while revenue from trading stocks and bonds were flat to down.

JPMorgan shares rose more than 6% in early trading.

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