JPMorgan and Citi increase profits despite economic slowdown

JPMorgan and Citigroup posted bumper first-quarter profits despite the economic turmoil that saw Silicon Valley Bank collapse and the sale of Credit Suisse.

JPMorgan’s first-quarter deposits unexpectedly rose from the end of last year and the firm boosted its guidance for this year’s net interest income. Shares of the company surged in early trading in New York.

The lender had $2.38 trillion (€2.15 trillion) in deposits at the end of March, compared with $2.34 trillion three months earlier, the company said in a filing on Friday. The influx of client money more than offset drains from inflation and customers seeking higher-yielding alternatives.

Net interest income was $20.7 billion in the quarter, a 49 per cent jump and above analysts’ expectations. JPMorgan raised its full-year NII guidance to about $81 billion from its roughly $73 billion estimate earlier this year, noting there are “significant sources of uncertainty”.

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JPMorgan and Citi’s results offer an early look at how the biggest banks fared through a tumultuous quarter.

“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,” chief executive Jamie Dimon said in a statement. “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.”

Shares of JPMorgan rose 5.4 per cent in early trading in New York.

Dimon wrote in his annual letter to shareholders earlier this month that issues at Silicon Valley Bank, which was seized by regulators in March, were “hiding in plain sight”. He predicted the episode is “not yet over” and warned that fallout will be felt for years.

Separately, Citigroup posted a surprise jump in first-quarter profit after its fixed-income traders delivered a windfall large enough to cover the rising cost of the bank’s souring loans.

Revenue from fixed income, currencies and commodities trading unexpectedly rose 4 per cent to $4.5 billion in the first quarter as clients reacted to changing interest rates, the bank said. That helped defy analyst predictions of a drop in profits.

Investors have been watching for signs of stress in US banking as rising interest rates boost funding costs, erode the value of balance-sheet assets and threaten to slow the economy, potentially hampering the ability of borrowers to repay debts. At Citigroup provisions for loan losses more than doubled to $2 billion, the highest since 2020, while deposits were unchanged at $1.33 trillion.

Still, the rate moves that toppled some regional US banks last month also provided opportunities for Wall Street traders.

Net income rose 7 per cent in the quarter to $4.6 billion. On an adjusted basis, per share profits amounted to $1.86, compared with the $1.65 estimated by analysts.

Meanwhile Wells Fargo reported higher-than-expected net interest income in the first quarter as the firm continued to reap the gains of the Federal Reserve’s rate hikes. – Bloomberg