Source: Zhitong Finance
J.P. Morgan Chase announced its first-quarter earnings report on Friday.
$JPMorgan (JPM.US)$First quarter earnings were announced on Friday. As the industry prepares for the Federal Reserve's interest rate cut later this year, the company's full-year net interest income (NII) guidance fell short of analysts' expectations.
The company expects NII to reach about 90 billion US dollars this year. The NII guidelines excluding trading business were raised from 88 billion US dollars to 89 billion US dollars, depending on market fluctuations, which is lower than analysts' expectations of 90.68 billion US dollars. Meanwhile, this year's adjusted spending is likely to reach around 91 billion US dollars, which is higher than previously anticipated.
For months, the bank's executives have warned that its NII surge is unsustainable. CEO Jamie Dimon also insisted on his cautious approach, although over the past few months there has been growing optimism about the economy's soft landing.
As Friday's results came out, investors were trying to assess the Fed's interest rate trend, especially after the inflation data released on Wednesday was higher than expected. Dimon has been warning for months that inflation may be more stubborn than the market expected, and wrote in Monday's annual shareholder letter that his company is ready to face interest rates of 2% to 8%, “or even higher.”
Dimon said in a statement: “Many economic indicators continue to improve. Looking ahead, however, we remain wary of some major uncertainties.” He cited the effects of war, growing geopolitical tension, continuing inflationary pressure, and quantitative austerity.
However, J.P. Morgan Chase's profit for the first quarter increased 6% to US$13.42 billion, or US$4.44 per share, compared to US$12.62 billion, or US$4.10 per share in the same period last year.
High interest rates boosted the bank's NII. The company's NII for the first quarter was US$23.1 billion, up 11% year over year. Excluding the influence of First Republic Bank, this figure was still up 5% year over year.
Overall revenue increased 9% year over year to $41.93 billion.
By business classification, trading business revenue fell 5% year on year to 8 billion US dollars, fixed income, currency and commodities revenue fell 7%, and stock business revenue remained flat year on year. Investment banking revenue increased 27% to $2 billion, driven by increased debt and stock underwriting expenses.
In addition, the bank also allocated 725 million US dollars to supplement the government deposit insurance fund, which is lower than the 3 billion US dollars set aside at the end of last year.
According to reports, J.P. Morgan Chase is one of the banking giants that provides most of the capital to the Federal Deposit Insurance Corporation (FDIC) fund. Last year, three regional banks went out of business, draining the fund's funds.
After buying the bankrupt First Republic Bank in May last year, J.P. Morgan also added billions of dollars in loans to its balance sheet. The acquisition also increased J.P. Morgan's interest income.
Compared to its peers who are laying off workers, J.P. Morgan Chase added about 2,000 employees to its 311,921 employees, which is 5% higher than the same period last year.
The bank has set aside $1.88 billion in credit loss reserves, compared to $2.28 billion last year.
As of Thursday, J.P. Morgan Chase's stock price had risen by a cumulative total of 14.9% this year, but after the earnings report was announced, the stock fell by about 4% before the market due to prudent performance guidelines.
Editor/jayden