JPMorgan leads the pack as big lenders take advantage of regional banking turmoil

JPMorgan Chase and other major U.S. banks on Friday reported bumper profits in the first three months of 2023 as they raked in billions of dollars in deposits from customers fleeing small lenders after the Silicon Valley Bank collapse in March.

Upbeat first-quarter earnings from JPMorgan, Citigroup and Wells Fargo show how big U.S. banks have benefited at a time of broader fears about the stability of regional banks following the collapses of SVB and Signature Bank.

The higher profits also underscored how banks are making hay after a year of interest rate hikes by the Federal Reserve, which lenders have used to bolster profits rather than dramatically raise rates for depositors. .

JPMorgan led the pack on Friday, with profits in the first three months of 2023 up more than 50% on higher loan income, known as net interest income. The bank also raised its outlook for net interest income for the rest of 2023 by nearly 10% to around $81 billion.

The largest U.S. bank by assets added $37 billion in new deposits in the first three months of 2023, bringing total deposits to $2.38 billion, defying analyst expectations of a decline .

Wells Fargo analyst Mike Mayo wrote in a research note that the results showed “no evidence of a banking crisis. . . it seems that JPM was a port in the storm”.

JPMorgan shares rose 7% in early New York afternoon.

Prior to SVB’s collapse, JPMorgan and other major banks regularly lost deposits as customers shifted their cash to higher-yielding products such as money market funds to benefit from Fed rate hikes.

Meanwhile, Citigroup also said it saw roughly $30 billion in deposit inflows in March, helping it report a slight 2.5% decline to $1.33 billion for the full quarter, which slightly exceeded analysts’ expectations.

“We saw a rally from March 7 to the end of the quarter,” Citi Chief Financial Officer Mark Mason said in a call with reporters. “He was associated with the turmoil of the sector.”

Citi reported higher-than-expected earnings on strong consumer spending and business activity.

Wells also reported higher-than-expected first-quarter earnings, but warned of potential losses in commercial real estate loans. Deposits fell 2% quarter-on-quarter to $1.36 billion.

“We saw moderate inflows from the few specific banks that were highlighted in the press, but those inflows have declined,” chief executive Charles Scharf said.

Citi shares rose 4.3% while Wells shares were down 0.4%, after rebounding earlier in the trading session.

Pittsburgh-based PNC, a so-called superregional U.S. bank, also reported results on Friday showing average deposits rose slightly in the quarter to $436 billion.

Despite the positive earnings, the major banks have adopted a cautious tone for the year ahead.

JPMorgan chief executive Jamie Dimon told analysts that “the near-term reading is higher recession risk” and that “people need to be prepared for the potential for higher rates for longer.”

Jeremy Barnum, chief financial officer of JPMorgan, said the lender did not expect to keep all recent inflows of deposits as they were “somewhat fickle”.

JPMorgan also announced a net reserve of $1.1 billion for credit losses, a sign that the bank is preparing for an increase in loan losses.

Citi set aside $2 billion for loan losses in the quarter, which was higher than expected. Mason said the bank’s relatively strong results had not changed its view that the economy was likely to slip into a recession in the second half of the year.

Bank of America reports results on Tuesday while Goldman Sachs and Morgan Stanley, whose businesses are more focused on investment banking, trading and asset management, report results on Tuesday and Wednesday, respectively.

A number of regional banks whose share prices were hit following the collapse of SVB will also release their results next week.

Dimon said “you’ll see next week, [that] the regional banks have quite good figures”.

#JPMorgan #leads #pack #big #lenders #advantage #regional #banking #turmoil

Leave a Reply

Your email address will not be published. Required fields are marked *