JPMorgan Chase outperforms analysts on higher rates and bond trading. The net income increased by 67 percent to $14.5 billion, or $4.75 per share. Earnings per share were $4.37 when excluding the impact of its First Republic acquisition in early May, which included a $2.7 billion “bargain purchase gain” from the government-brokered takeover and loan reserve builds and securities losses related to the acquisition.
JPMorgan’s revenue increased 34% to $42.4 billion due to higher interest rates and robust loan growth. Revenue growth was driven by a 44% increase in net interest income to $21.9 billion, which exceeded StreetAccount’s forecast by approximately $700 million. Average loans increased by 13%, while average deposits decreased by 6%.
“The U.S. economy remains resilient,” stated CEO Jamie Dimon in the earnings release. “Consumer balance sheets remain robust, and consumers continue to spend, albeit at a slightly slower rate. The labor market has moderately weakened, but job growth remains robust.”
Dimon added that there were “imminent risks” such as dwindling consumer balances, the possibility that interest rates would remain elevated for longer than anticipated, and geopolitical tensions such as the Ukraine conflict.
JPMorgan raised its 2023 net interest income forecast to $87 billion, a $3 billion increase from its May forecast and the bank’s third NII forecast increase this year. The bank’s stock rose about 2%.
indices of resilience
This quarter, JPMorgan’s retail banking division was its primary source of strength. The company’s profit increased by 71% to $5.3 billion due to a 37% rise in revenue.
The bank’s results also benefited from trading and investment banking activity that exceeded expectations. In May, the bank projected a 15% decline in revenue from Wall Street activities compared to the previous year.
However, revenue from fixed-income trading decreased by only 3% to $4.6 billion, exceeding the StreetAccount forecast by nearly $500 million. The equity trading revenue of $2.5 billion exceeded the estimate of $2.41 billion. And investment banking revenue of $1.5 billion exceeded expectations of $1.42 billion.
Octavio Marenzi, chief executive officer of the consulting firm Opimas, remarked, “The results were exceptional and demonstrated strength across the board.” Even investment banking, a problem child for the past year or so, is beginning to show signs of vitality.
JPMorgan has recently excelled on multiple fronts. Since the regional banking crisis began in March, the bank has outperformed smaller competitors regarding deposits, financing costs, and net interest income — all hot-button issues.
This has contributed to an 11% increase in the bank’s stock this year through Thursday, compared to a 16% decline in the KBW Bank Index. When JPMorgan last disclosed earnings in April, its stock experienced its largest earnings day increase in 20 years.
First Republic consequence
This time, JPMorgan owned First Republic for most of the quarter. The acquisition, which added approximately $203 billion in loans and securities and $92 billion in deposits, assisted JPMorgan in weathering some of the industry’s headwinds. Banks are losing low-cost deposits as consumers move their money to higher-yielding investments, causing the industry’s funding costs to rise.
This puts pressure on the profit margins of the industry. Several regional banks reported lower-than-anticipated interest income last month, and analysts anticipate more banks to do the same in the coming weeks. On top of that, banks are expected to report a decline in loan growth and rising costs associated with commercial real estate debt, all squeezing banks’ profits.
Citigroup and Wells Fargo also reported earnings on Friday. Bank of America and Morgan Stanley will release earnings reports on Tuesday. Wednesday, Goldman Sachs discloses results.