July 14 (Portal) – JPMorgan Chase (JPM.N) topped Wall Street’s estimates for second-quarter earnings despite its boss Jamie Dimon warning of unprecedented economic risks.
Earnings for the largest US lender rose as it earned more on borrowers’ interest payments and benefited from its purchase of First Republic Bank.
While Dimon said the US economy remains resilient, he struck a cautious tone about the impact of stubborn inflation, rising interest rates and the war in Ukraine.
“The consumer is doing fine, shedding their excess cash,” Dimon said. “But the headwinds are significant and in some ways unprecedented,” he said on a conference call.
After weeks of industry turmoil, the bank bought much of the assets of the failed First Republic Bank in May in a government-backed deal.
As a result, net interest income (NII), which measures the difference between banks’ income from loans and withdrawals from deposits, increased.
The bank’s NII, which has also benefited from high interest rates, was $21.9 billion, up 44% or 38% excluding First Republic.
According to Refinitiv IBES data, the bank forecast full-year NII of around $87 billion, higher than the $83.37 billion Wall Street had expected.
Chief Financial Officer Jeremy Barnum said he expects the NII to be significantly lower due to market uncertainty, but didn’t give a specific timeframe for the expected decline.
JPMorgan’s earnings soared 67% to $14.47 billion, or $4.75 per share, for the quarter ended June 30. Excluding one-time charges, the bank earned $4.37 per share, well above analysts’ average estimate of $4.00 per share.
The bank also built a $2.9 billion loan loss reserve, more than double the year-earlier level, to prepare for weakening credit.
“It was very hard to find anything wrong with JP Morgan’s earnings,” said Octavio Marenzi, CEO of consulting firm Opimas.
“Consumer banking was particularly strong, but investment banking, which was a problem child last year, is also showing the first signs of life.”
JPMorgan’s diversified businesses and acquisition of First Republic Bank have helped the bank solidify its position with strong numbers, analysts said.
JPMorgan shares fell 0.1% to $148.72 in late morning trade.
“GREEN ROOTS”
The better-than-expected results come amid a possible end to the Federal Reserve’s rate hikes, which have boosted profits at major US banks in recent quarters.
Expectations that inflation has peaked and that the Fed is nearing the end of its tightening campaign have boosted sentiment across all markets and helped the S&P 500 Index (.SPX) fall to last close this year posted an increase of 17.46%.
Nevertheless, the bank remains cautious.
“I just want to caution against jumping to too many super positive conclusions based on some recent data expressions,” Barnum said.
While the monetary tightening campaign has stalled mergers and acquisitions – another important source of revenue for banks – a spate of IPOs has raised hopes that capital market activity is beginning to recover.
Some “green shoots” are emerging, Barnum said, but it’s too early to call a trend.
Investment banking revenue rose 11% to $1.5 billion for the quarter. Earnings from the market fell 10%, with both fixed income and equity trading falling. Business fared better than the bank’s forecast in May, when it announced that revenue from investment banking and trading would fall 15%.
While JPMorgan laid off employees in some of its businesses, its total workforce increased 8% to a record 300,066.
Reporting by Niket Nishant and Noor Zainab Hussain in Bengaluru and Nupur Anand in New York; Additional reporting by Bansari Mayur Kamdar; Edited by Lananh Nguyen, Saumyadeb Chakrabarty and Anna Driver
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