JPMorgan (JPM) posted much stronger-than-expected first quarter earnings Friday thanks to a big boost in net interest income from higher interest rates that partly offset concerns over the health of the U.S. banking sector.
JPMorgan said earnings for the three months ending in December were pegged at $12.62 billion, or $4.1 per share, up 56% from the same period last year and well ahead of the Street consensus forecast of $3.41 per share.
Managed revenues, JPMorgan said, rose 21% from last year to $38.35 billion, again well ahead of analysts' estimates of a $33.6 billion tally, while expenses were up 4.7% at $20.1 billion. The bank also built $2.3 billion in reserves -- a 56% increase from last year -- to set against bad loans and credit losses.
Net interest income was $20.8 billion, up 49% from the same period last year, JPMorgan said, while equity market revenues were flat at $1.9 billion and fixed income revenues rose 12% to $3.7 billion.
"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," said JPMorgan CEO Jamie Dimon. "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."
"The banking situation is distinct from 2008 as it has involved far fewer financial players and fewer issues that need to be resolved, but financial conditions will likely tighten as lenders become more conservative, and we do not know if this will slow consumer spending," he added. "We also continue to monitor for potentially higher inflation for longer (and thus higher interest rates), the inflationary impact of continued fiscal stimulus, the unprecedented quantitative tightening, and geopolitical tensions including relations with China and the unpredictable war in Ukraine."
JPMorgan shares were marked 6.8% higher in early Friday trading immediately following the earnings release to change hands at $137.70 each.
Earlier this month, in his annual letter to shareholders, Dimon cautioned that the U.S. banking crisis is "not over", adding that tighter credit conditions linked to the failure of Silicon Valley Bank and the rescue of Credit Suisse have increased the odds of recession.
Dimon said the SVB collapse, as well as the closure of Signature Bank, would be felt "for years to come" and noted that, unlike the 2008 financial crisis, stresses at regional lenders had been "hiding in plain sight."
"The failures of SVB and Credit Suisse have significantly changed the market's expectations, bond prices have recovered dramatically, the stock market is down and the market's odds of a recession have increased," Dimon wrote.
"And while this is nothing like 2008, it is not clear when this current crisis will end. It has provoked lots of jitters in the market and will clearly cause some tightening of financial conditions as banks and other lenders become more conservative."
Dimon, in fact, played a key role last month in brokering a pact among a consortium of 11 banks -- in coordination with the Federal Reserve and the U.S. Treasury -- to add a collective $30 billion to the deposit base of struggling San Francisco-based lender and wealth manager First Republic (FRC) as the broader sector reeled from the collapse of Silicon Valley Bank.
