Since rising interest rates permitted the bank to charge clients more for loans, JPMorgan Chase & Co.’s first-quarter earnings increased by 52%. After the collapse of Silicon Valley Bank and Signature Bank last month, the bank experienced a noticeable increase in deposits as businesses and consumers rushed to the banking giant.
Among the largest and most complicated financial firms in the country, there appear to be few indicators of impending danger with JPMorgan’s outstanding results and Citigroup’s and Wells Fargo’s solid reports on Friday.
Market players combed through the data looking for evidence of fractures in the US banking system, making these the most scrutinized bank earnings releases in almost a decade. Octavio Marenzi, CEO of Opimas LLC, a consulting business, stated in an email, “Those analysts looking for signs of the banking crisis were greatly relieved to not find any.”
The nation’s largest bank by assets, JPMorgan Chase, reported a $12.62 billion profit, up from $8.28 billion during the same time last year. Bank earnings per share increased to $4.10 from $2.63 in the prior year, above market forecasts.
The majority of the increase in profits was due to the rise in interest rates. There was a 49% increase in the bank’s quarterly net interest income to $20.8 billion.
JPMorgan had a $37 billion increase in deposits during the quarter, bringing the total to $2.4 trillion. For several quarters, deposit levels at major banks had been declining as people used up their personal savings and companies used their cash reserves to pay payments. With the March failures of Silicon Valley Bank and Signature Bank, however, many companies have begun shifting their money out of smaller banks and into the “too big to fail” institutions that are guaranteed by the government.
JPMorgan’s CFO Jeremy Barnum told reporters that majority of the deposits went to accounts recently created by businesses and corporations. For a number of quarters, the influx of fresh deposits completely stopped the outflow of deposits from the bank.
UBS analysts headlined their study, “What crisis?,” after JPMorgan, Wells, and PNC released their numbers.
JPMorgan and its CEO Jamie Dimon have been relied on by the financial sector for years to provide solutions to complex problems. JPMorgan played a key role in assembling a consortium of other major banks to prevent the demise of First Republic Bank following the collapse of Silicon Valley Bank and Signature Bank. The $30 billion in uninsured deposits from the consortium looks to have bought First Republic, a midsize bank, some time to fix its balance sheet and maybe find a buyer.
Businesses are doing well, consumers are still spending, and the economy as a whole is in good shape in the United States. But the storm clouds we’ve been watching for the past year are still out there, and the turbulence in the banking industry just heightens those dangers,” Dimon warned.
Consumers’ shift from saving to spending has been good for JPMorgan. The bank benefits from both the transaction fees and the interest accrued on outstanding balances since credit card spending increased by 13% year-over-year and more customers chose to carry a load than pay it off.
Meanwhile, the bank’s corporate and investment banking division continues to see low volumes of business as companies and investors delay major investments due to inflation fears. The firm’s advising fee income was unchanged, while its stock and bond trading income was flat to down.
In the first few minutes of trade, JPMorgan shares gained almost 6%.