JPM: No Crisis

15 Apr 2023

Record first-quarter revenue on Friday that topped analysts’ expectations as net interest income surged almost 50% from a year ago on higher rates.

Here’s what the company reported:

Adjusted earnings: $4.32 per share vs. $3.41 per share Refinitiv estimate
Revenue: $39.34 billion, vs. $36.19 billion

The bank said profit jumped 52% to $12.62 billion, or $4.10 per share, in the first three months of the year. That figure includes 868 million in losses on securities; excluding those losses lifts earnings by 22 cents per share, resulting in adjusted profit of $4.32 per share.

Companywide revenue rose 25% to $39.34 billion, driven by a 49% rise in net interest income to $20.8 billion, thanks to the Federal Reserve’s most aggressive rate-hiking campaign in decades. That topped analysts’ expectations for interest income by more than a billion dollars.

The bank also boosted a key piece of guidance that bodes well for the near future: Net interest income will be about 81 billion this year, about 7 billion more than their previous forecast of $74 billion, CFO Jeremy Barnum said Friday.

The change was mostly driven by expectations that JPMorgan will have to pay less to depositors later this year if the Fed cuts rates, he said.

Shares of the bank rose 7.5%. That is its biggest upside move on an earnings report in more than 20 years, according to Bespoke Investment Group.

“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 said, adding that the industry could rein in lending as banks become more conservative ahead of a possible downturn.

Money in, money out
JPMorgan, the biggest U.S. bank by assets, is watched closely for clues on how the industry fared after the collapse of two regional lenders last month. Analysts had expected JPMorgan to benefit from an influx of deposits after Silicon Valley Bank and Signature Bank experienced fatal bank runs.

Indeed, JPMorgan saw “significant new account opening activity” and deposit inflows in its commercial bank, Barnum said.

The money flows implied “an intra-quarter reversal of the recent outflow trend as a consequence of the March events,” Barnum said. “We estimate that we have retained approximately 50 billion of these deposit inflows at quarter-end.”