Wells Fargo analyst Mike Mayo said in a note that “Goliath is winning,” highlighting growth, scale and resilience in an “exceptionally strong quarter” for JPMorgan, which he called a “port in the storm” during the recent turmoil in the banking sector.
Banks are hoarding emergency funds amid fears of an economic slowdown caused by the US Federal Reserve’s aggressive interest rate hikes to tame inflation, as well as recent turmoil over the failure of two midsize banks. .
JPMorgan Chief Executive Jamie Dimon warned that while the US economy remains robust, the recent banking crisis with the sudden failure of Silicon Valley Bank and Signature Bank last month could cause lenders to turn more conservative and, at the same time, affect consumer spending.
“The dark clouds that we have been watching for the past year remain on the horizon, and turmoil in the banking sector adds to these risks,” Dimon said.
One area where big banks have had a harder time turning a profit in 2023 has been investment banking, which was reflected in JPMorgan’s business with unit revenue down 24%.
Global mergers and acquisitions (M&A) activity contracted to its lowest level in more than a decade in the first quarter as rising interest rates, high inflation and fears of a recession dampened appetite for investors. big business.
Problems in the future?
JPMorgan beat market expectations with its profit rising 52% to $12.62 billion, or $4.10 a share, in the three months to the end of March, while its loan-loss provisions increased 56% to $2.3 billion. of dollars.
Net interest income, which measures a bank’s earnings from lending, rose 49% to $20.8 billion.
Citigroup also beat Wall Street forecasts, also helped by the effects of the Fed’s tightening, even though it set aside $241 million to cover potential loan losses, compared with the $138 million it released. a year ago.
For its part, Wells Fargo set aside $1.21 billion in the quarter to cover possible loan losses, compared to the $787 million it released a year earlier.
In another key part of the financial services sector, BlackRock reported an 18% drop in its first-quarter profit but beat analysts’ estimates as investors continued to pour money into its funds.
Headquartered in New York, BlackRock, the world’s largest asset manager, which derives most of its revenue from fees for investment management and advisory services, closed the first quarter with $9.1 trillion in assets under management, less than 9.57 billion a year earlier, but more than 8.59 billion in the fourth quarter.
