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<\/a><\/p>\nBy Niket Nishant and Nupur Anand<\/p>\n
(Reuters) -JPMorgan Chase & Co beat Wall Street\u2019s estimates for quarterly profit and raised its outlook for interest income on Friday, emerging as one of the biggest winners of a flight to safety during last month\u2019s banking crisis.<\/p>\n
The largest U.S. lender gained $50 billion in deposits at the end of March, even as the rest of the industry saw a 3% decline in the first quarter. <\/p>\n
\u201cJPM reflects our theme that \u2018Goliath is Winning\u2019 in terms of growth, scale, and resiliency,\u201d wrote Wells Fargo analyst Mike Mayo in a research note.\u00a0<\/p>\n
J.P. Morgan’s results underscore big banks’ resilience in the face of industry turmoil. Its diversified businesses and trillions of dollars in assets helped the lender to withstand a crisis that beset regional and smaller lenders.<\/p>\n
Net interest income, a measure of the difference between what it pays depositors and what it charges for loans, increased 49%, boosting overall profits by 52%.<\/p>\n
The lender also increased its forecast for net interest income to $81 billion this year, excluding profits from markets, from an earlier $74 billion.<\/p>\n
While the crisis is not over yet, CEO Jamie Dimon said he expected the tumult from bank failures in March to eventually pass. <\/p>\n
JPMorgan set aside loan loss provisions of $2.3 billion, up 56% from last year even though Dimon expects that recession “may still be pushed off a little bit.”<\/p>\n
“You still see sticky inflation and then in front of us issues like higher rates, the war in Ukraine — those are still substantial concerns,” he added.<\/p>\n
Investment banking revenue slid 24% to $1.6 billion as dealmaking remained slow. <\/p>\n
“Our pipeline is relatively robust,” but still “sensitive to market conditions and the economic outlook,” Jeremy Barnum, the company’s finance chief, said in a conference call. “We expect the second quarter and the rest of the year to remain challenging.” <\/p>\n
The bank’s shares rose more than 7%.<\/p>\n
‘DEPOSITS MAY NOT BE STICKY’<\/p>\n
Even though JPMorgan is sitting on a pile of new deposits in the aftermath of the recent bank failures, it warned that there could be outflows.<\/p>\n
“It’s a competitive market and it’s entirely possible that people temporarily come to us, and then over time, decide to go elsewhere,” Barnum said. The new deposits were not a big factor in JPMorgan’s more optimistic income projection, he added.<\/p>\n
“There’s no pricing power that the bigger banks have,” Dimon said.<\/p>\n
The U.S. consumer and the economy remain robust, Dimon said, while cautioning that the banking crisis could turn lenders more conservative and impact consumer spending.<\/p>\n
“The U.S. economy continues to be on generally healthy footings \u2014 consumers are still spending and have strong balance sheets, and businesses are in good shape,” Dimon said.<\/p>\n
While more customers are making late payments, the delinquencies are not a problem for now, Barnum added.<\/p>\n
Lenders could pull back on lending in commercial real estate, even though JPMorgan is not looking at immediately changing its underwriting standards in that area. <\/p>\n
“JPM is one of those household names in a sector that we were the most concerned about reporting better than expected earnings, and that is certainly putting a bid in the stock and a bid in the market,” said Art Hogan, chief market strategist at B Riley Wealth in Boston.<\/p>\n
RETURN TO OFFICE<\/p>\n
JPMorgan has asked its senior bankers to come to the office five days a week at a time when some peers, such as Citigroup, have embraced hybrid working.<\/p>\n
“We completely understand that some people don’t want to do it — they can not do it elsewhere,” Dimon told reporters on a conference call.<\/p>\n
The lender’s headcount rose 8% to 296,877 in the first quarter versus a year earlier. It is expected to remain flat for the rest of 2023, the executives said.<\/p>\n
(Reporting by Niket Nishant in Bengaluru and Nupur Anand in New York; Additional reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Lananh Nguyen, Saumyadeb Chakrabarty and Nick Zieminski)<\/p>\n
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