July 14 (Reuters) – JPMorgan Chase ( JPM.N ) beat Wall Street estimates for second-quarter profit even as its chief Jamie Dimon warned of unprecedented economic risks.
The largest US lender’s income rose as it profited from interest payments to borrowers and benefited from the purchase of First Republic Bank.
While Dimon said the US economy remains strong, he struck a cautious tone about the effects of stubborn inflation, rising interest rates and the war in Ukraine.
“The consumer is doing well, they’re spending their extra money,” Dimon said. “But the headwinds are numerous and relatively unprecedented,” he said on a conference call.
The bank bought most of the failed assets of First Republic Bank in a government-backed deal in May after weeks of industry turmoil.
It strengthens the net interest income (NII), which measures the difference between the banks’ earnings on loans and payments on deposits.
The bank’s NII, which also gained from high interest rates, was $21.9 billion, up 44%, or up 38% excluding First Republic.
The bank estimated NII at about $87 billion for the full year, higher than the $83.37 billion expected by Wall Street, according to Refinitiv IBES data.
Chief Financial Officer Jeremy Barnum said he expects the NII to be lower due to market uncertainty, but he did not provide a specific timeframe for the expected decline.
JPMorgan’s profit rose 67% to $14.47 billion, or $4.75 per share, for the quarter ended June 30. Excluding one-time costs, the bank earned $4.37 per share, comfortably ahead to the average analyst estimate of $4.00 per share.
The bank also set aside a $2.9 billion provision for credit losses, more than doubling from last year, to prepare loans.
“It is very difficult to find any fault with JP Morgan’s earnings,” said Octavio Marenzi, CEO of consultancy firm Opimas.
“Consumer banking is very strong, but even investment banking, which has been a problem baby for the last year or so, is starting to show signs of life.”
JPMorgan’s various businesses and the acquisition of First Republic bank helped the bank strengthen its position with a strong set of numbers, analysts said.
JPMorgan shares were 0.1% lower at $148.72 in late morning trading.
‘GREEN SHOOTS’
The better-than-expected results come against the backdrop of a possible end to the Federal Reserve’s rate hikes that have grown profits at major US banks over the past few quarters.
Expectations that inflation has picked up and that the Fed is nearing the end of its tightening campaign, boosted sentiment across the market and helped the S&P 500 index (.SPX) post a 17.46% gain so far this year, at last closing.
However, the bank remains cautious.
“I would just caution against jumping to too many super positive conclusions based on a couple of recent prints,” Barnum said.
While the monetary tightening campaign has halted mergers and acquisitions – another major source of income for banks, a surge in initial public offerings has raised hopes of a new recovery in activity. in the capital markets.
A few “green shoots” are emerging, Barnum says, but it’s too early to call them a trend.
Investment banking revenue for the quarter rose 11% to $1.5 billion. Market revenue fell 10%, with both fixed income and equities trading taking a hit. Businesses are doing better than the bank’s outlook in May, when it said investment and trade banking revenue would decline by 15%.
While JPMorgan laid off employees in some of its businesses, the total headcount rose 8% to a record 300,066.
Reporting by Niket Nishant and Noor Zainab Hussain in Bengaluru and Nupur Anand in New York; Additional reporting by Bansari Mayur Kamdar; Editing by Lananh Nguyen, Saumyadeb Chakrabarty and Anna Driver
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