JPMorgan Q1 Profit Surpasses Expectations Despite Interest Income Missing Predictions

By Jace Dela Cruz

Apr 13, 2024 12:50 AM EDT

JPMorgan Chase exceeded expectations in its first-quarter profit, but shares dropped by 6% as projections for interest income fell short of analyst forecasts.

CEO Jamie Dimon maintained a cautious stance, citing various uncertain factors affecting the economic outlook, including global conflicts and persistent inflationary pressures.

Jamie Dimon Takes Cautious Stance

Despite these challenges, Dimon highlighted the strength of the American economy, noting that consumers have surplus money and that stock prices are up.

While high borrowing costs had previously boosted net interest income (NII), recent months have seen a surge in concern over the possibility of the U.S. Federal Reserve cutting interest rates, which could negatively impact banks' income.

JPMorgan's revised estimate for NII, excluding trading, reached $89 billion for the year, slightly up from previous estimates but below analysts' expectations, according to a report by Reuters.

JPMorgan Chase Profit

Despite the decline in stock value, Octavio Marenzi, CEO of Opimas, noted encouraging financials for the bank, with the only negative being an increase in non-interest expenses.

JPMorgan allocated $725 million to replenish a government deposit insurance fund, less than the previous $3 billion set aside.

Expenses were revised to $91 billion, with the bank adding approximately 2,000 employees in the first quarter, contrasting with peers downsizing staff.

Profit reached $13.42 billion, up 6%, with loans increasing by 16% to $1.31 trillion and NII rising by 11% to $23.2 billion. Overall revenue increased by 9% to $41.93 billion.

In the first quarter, JPMorgan and Wells Fargo made a notable move by releasing reserves for potential loan losses that they had previously set aside. This suggests that they have gained more trust in the Federal Reserve's ability to control inflation without harming the economy.

It appears that certain individuals in the United States may be facing financial strain, following a period of elevated inflation and a decrease in wage growth.

Consumers, especially those with lower incomes, are now using up the money they saved during the pandemic. Credit card spending increased by 8% across the three banks, while loans saw a more significant rise of 13% due to consumers carrying higher balances.

The mortgage businesses at the megabanks continue to struggle, despite a temporary decrease in rates earlier this year. In the first quarter, JPMorgan experienced a 16% increase in originations, while Wells Fargo saw a 38% decrease.

This decline was expected, as Wells Fargo had previously announced its plans to reduce its mortgage business. Citigroup reported a 6% decline in originations in the consumer bank. Originations at all three banks experienced a significant decline compared to pre-pandemic levels.

According to Wall Street Journal, commercial real estate remains a source of concern for the banking system, particularly for smaller banks that have heavily invested in office and retail loans compared to larger banks.

JPMorgan's Chief Financial Officer, Jeremy Barnum, stated that the bank's portfolio of commercial real-estate loans is not experiencing significant deterioration, although it continues to encounter obstacles.

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