Despite tough times for the banking industry, some of the largest US lenders reported first-quarter earnings on Friday that easily beat investors’ expectations. And although they warn that credit will become increasingly scarce and expensive, they say the economy has proven strong so far.
Banks’ profits are bolstered by higher interest rates, which allow them to charge more for loans than they pay for deposits. The strong reports are also a reflection that the collapse of Silicon Valley Bank and Signature Bank last month appears to have strengthened the biggest banks by pushing customers to larger institutions that are considered more reliable. strong.
JPMorgan Chase, the nation’s largest bank, reported earnings that rose almost across the board, helping it earn $12.6 billion in revenue, a 52 percent jump from the same quarter last year.
The bank said its loans were steady and customer deposits rose slightly in the first quarter from the previous quarter, with inflows in particular after smaller competitors saw depositors pull back. in cash a lot.
“We had a tough spell in March, but things are looking good now,” said JPMorgan’s chief financial officer, Jeremy Barnum.
The bank’s chief executive, Jamie Dimon, who played a leading role in bailing out small lenders, said the banking crisis was different, but financial conditions were likely to tighten as lenders, including JPMorgan, will be more conservative. “Eventually we’re going to have a recession, but that’s going to go away a little bit,” he said.
JPMorgan has set aside nearly $2.3 billion to protect against borrowers who fall behind on their loans. That’s up from $1.5 billion in the same quarter last year, largely due to a worse economic outlook, the bank said.
Citigroup, the nation’s third-largest lender, reported revenue of $4.6 billion in the first quarter, up 7 percent from the same period last year and ahead of forecasts. Profits jumped 12 percent from last year, which came “despite a turbulent environment for banks,” Jane Fraser, the bank’s chief executive, said in a statement.
The bank’s loan book was virtually unchanged and deposits fell 3 percent from the previous quarter.
Wells Fargo also beat analysts’ expectations, reporting revenue of nearly $5 billion in the first quarter, a 32 percent increase from a year ago. Rising interest rates boosted the bank’s profits as its loan portfolio grew, led by gains in personal lending and higher credit-card balances.
There was little sign of nervous depositors fleeing to the safety of the lender, the nation’s fourth-largest bank. Wells Fargo’s average deposits decreased $24 billion, or 2 percent, from the prior quarter. Loans have changed little.
Charlie Scharf, the bank’s chief executive, said Wells Fargo was “pleased to be in a strong position to help support the US financial system” during the recent turmoil in the industry. The bank’s top priority, he said, remains improving its internal controls; The bank has been battered by regulators for years and has paid billions in fines for various wrongdoings.
Analysts are watching banks closely for signs of tightening lending that could lead to a credit crunch, but Wells Fargo “didn’t change our credit risk appetite much” last quarter, said Michael P Santomassimo, the bank’s chief financial officer.
“Consumers and many of the businesses that are our clients come into this environment in a very strong position,” he said. “Consumers continue to spend.”
PNC Financial, the nation’s sixth-largest bank, says industry volatility has ended up playing to its strengths. Although it has been swept up in the turmoil surrounding midsize banks, PNC, a so-called super regional lender, is larger and more diversified than its smaller rivals. PNC played savior in last month’s rescue plan for ailing First Republic Bank, putting $1 billion in bank deposits as part of a $30 billion deal engineered by Mr. Demon.
PNC deposits grew slightly last quarter. Its net income rose to $1.7 billion, up 18 percent from last year.
Investors welcomed the batch of bank reports, their first look inside the books of industry bellwethers since the failure of Silicon Valley and Signature Bank, sending share prices higher. JPMorgan stock jumped more than 6 percent in early trading, leading the banks’ gains.
“The banking system is very good – it’s stable,” Lael Brainard, director of President Biden’s National Economic Council, said this week at an event in Washington.
But Federal Reserve staff are projecting that the overall banking turmoil will prompt a “mild” recession later this year, according to minutes of a meeting of policymakers last month. Retail sales in March fell 1 percent from the previous month, data released Friday showed, which unlike big banks’ earnings reports was weaker than analysts had expected.
