Financial Results

Earnings, Revenues Jump At JP Morgan

Tom Burroughes Group Editor 17 April 2023

Earnings, Revenues Jump At JP Morgan

Among the details of the data is how rising interest rates have boosted the bank's net interest income, signifying that rate rises are positive in a way for earnings.

JP Morgan kicked off the first-quarter results reporting season last Friday, saying that it logged $12.62 billion in Q1 net income, surging from $8.28 billion a year ago. Revenues rose to $38.34 billion from $30.72 billion a year before.

Provision for credit losses rose from a year ago, to $2.275 billion from $1.46 billion a year ago, the New York-listed banking group said in a statement.

The Q1 data from this and other banks is coming out at a time when investors are looking for signs of how robust – or not – lenders are in light of the collapse in March of Silicon Valley Bank and Signature Bank, and the pressures on other lenders, such as First Republic Bank

Rising central bank interest rates are helping margins. JP Morgan said its net interest income rose 49 per cent year-on-year to $20.8 billion. Excluding the markets area of the business, NII surged by 78 per cent. The boost caused by higher rates was partly offset by lower deposit balances from a year earlier.

Within the banking and wealth management segments (under the consumer and community banking division), net revenue in Q1 was $16.45 billion, up from $12.2 billion a year ago, JP Morgan said.

In the asset and wealth management arm, net revenue rose 11 per cent year-on-year to $4.78 billion. Net income in this division stood at $1.367 billion, a rise of 36 per cent.

"The US economy continues to be on generally healthy footings – consumers are still spending and have strong balance sheets, and businesses are in good shape. However, the storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks," Jamie Dimon, chief executive, said. "The banking situation is distinct from 2008 as it has involved far fewer financial players and fewer issues that need to be resolved, but financial conditions will likely tighten as lenders become more conservative, and we do not know if this will slow consumer spending."

At the end of March, JP Morgan said it had a Basel III Common Equity Tier 1 capital ratio – a standard international measure of capital buffer – of 13.8 per cent, on a standardised ratio basis. The firm’s supplementary leverage ratio was 5.9 per cent. (The leverage ratio is defined as the capital measure divided by the exposure measure, expressed as a percentage. The higher the tier 1 leverage ratio, the higher the likelihood of the bank withstanding negative shocks to its balance sheet.)

The bank caused controversy this week by taking aim at the "working from home" trend seen in parts of the financial services sector. It wants senior managers to work from the office five days a week. 

“They have to be visible on the floor, they must meet with clients, they need to teach and advise, and they should always be accessible for immediate feedback and impromptu meetings. We need them to lead by example, which is why we’re asking all managing directors to be in the office five days a week,” the note said, which was sent to staff last Friday (source: CityAM, others).

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