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JPMorgan Chase’s profits rose 6 per cent in the first quarter and it lifted the amount it expects to earn from its core lending business, as markets adjust to the prospect that the US Federal Reserve will cut rates more slowly than previously thought.
The largest US bank by assets said net income increased to $13.4bn in the first quarter, up from $12.6bn a year earlier and better than analysts had expected. JPMorgan set aside less than analysts anticipated for loan losses.
The lender also lifted its full-year guidance for net interest income outside of its trading business — broadly the difference between what it pays on deposits and what it earns from loans and other assets — to around $89bn from an earlier forecast of around $88bn. JPMorgan reported NII of around $90bn in 2023.
The increased guidance reflects the new consensus in financial markets that the Fed will make fewer cuts to benchmark interest rates this year than previously anticipated.
But investors appeared unimpressed with the modest increase, with JPMorgan shares down around 2 per cent in pre-market trading.
Large banks have reaped billions of dollars in the past two years from high interest rates, passing on interest rate rises to depositors more slowly than borrowers. The gains by the likes of JPMorgan and Bank of America have come at a time when many small and mid-sized US lenders have struggled.
JPMorgan also warned it now expects expenses for 2024 to be $91bn, up from $90bn previously, as it has to pay an estimated $725mn more in charges to US regulators to cover costs linked to last year’s regional bank failures.
“Many economic indicators continue to be favourable,” JPMorgan chief executive Jamie Dimon said in a statement.
“However, looking ahead, we remain alert to a number of significant uncertain forces,” he added, pointing to an “unsettling” global landscape and “a large number of persistent inflationary pressures, which may likely continue”.
JPMorgan is reporting earnings along with Citigroup and Wells Fargo. Bank of America, Goldman Sachs and Morgan Stanley report results early next week.
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