JPMorgan profits hit record after bank releases bad debt reserves
JPMorgan Chase JPM 1.55%
& Co. posted an increase of nearly five times its quarterly profit, thanks to booming markets and an economic recovery that freed it up to $ 5.2 billion in funds it had set aside for cover deteriorated loans.
The nation’s largest bank reported a record quarterly profit of $ 14.3 billion, or $ 4.50 per share, well above the $ 3.10 per share forecast by analysts polled by FactSet. A year earlier, JPMorgan had reported quarterly profit of $ 2.87 billion, or $ 0.78 per share. The bank reported revenues of $ 32.27 billion, up 14% from the previous year.
After the coronavirus pandemic took hold in the United States early last year, JPMorgan and other major banks set aside billions of dollars in loan loss reserves to prepare for a potential flood of defaults by consumers and businesses. Rainy day funds have absorbed quarterly profits for much of 2020. But big losses never materialized, and now banks are now profiting from their due diligence.
Wall Street also fed JPMorgan’s first quarter results. Corporate and investment bank profits nearly tripled to $ 5.74 billion, a quarterly record, and revenues rose 46% to $ 14.6 billion. Trading revenues are up 25% from a year ago and investment banking fees are up 57%.
The rebound in the US economy has exceeded internal bank forecasts. Banks believe the trillions of dollars in government stimulus flowing through the economy, coupled with accelerated vaccine distribution, have isolated consumers and businesses from the worst financial scenarios of the pandemic.
“The year has started well and a strong economic recovery is underway,” CFO Jennifer Piepszak said on a call with reporters Wednesday morning. “Of course, there are still risks and uncertainties that we are preparing for, as well as specific issues that we face.”
In his annual letter to shareholders last week, CEO Jamie Dimon said he believes the economy is ready for a “Goldilocks moment” of rapid growth and inflation and rates. interest slowly rising.
The bank’s stock price reflects this change. JPMorgan shares have risen 19% year-to-date. The KBW Nasdaq Bank Index, which tracks stocks of the largest lenders, is up more than 26% this year, compared to nearly 10% for the S&P 500.
The forces that pushed JPMorgan’s Wall Street operation to its best fourth quarter on record last year continued into the early months of 2021. Record investments in blank check companies helped drive up fees share subscription. Billions of dollars in government stimulus have been poured into Americans’ checking accounts, and some of it has ended up in the stock market.
The bank made a record $ 3 billion in investment banking fees in the first three months of the year. He expects a stronger economy, a loaded list of public offerings and high CEO confidence to provide a steady pipeline of deals, the head of the corporate and investment banking unit said. of the bank, Daniel Pinto, in a note to employees on Wednesday.
Revenue fell 6% in JPMorgan’s large consumer business. In asset and wealth management, turnover increased by 20%.
Total loans are about 4% lower than a year ago. Major U.S. lenders saw their credit books shrink in 2020 for the first time in more than a decade, but banking executives say they expect demand to pick up later this year as the economy continues. continues to recover.
Yet banks have been crushed over the past year by low interest rates, which limit what they can do with loans. The difference between what JPMorgan earns on loans and pays for deposits fell to 1.69% in the first quarter, from 2.37% a year ago.
Deposits increased another 6% from the previous quarter to $ 2.28 trillion.
Write to Orla McCaffrey at [email protected]
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