The US bank published its figures for the first quarter of 2023 on Friday.
(Photo: Bloomberg)
New York, Berlin The major US banks JP Morgan and Wells Fargo benefited in the first quarter from the US Federal Reserve’s turnaround in interest rates. Industry leader JP Morgan increased profits by 52 percent to $12.6 billion with record earnings of $38.3 billion (previous year: $30.7 billion).
The Fed’s sharp hikes in interest rates caused net interest income to rise by 49 percent to $20.8 billion. The picture at Wells Fargo is similar: At the bank from San Francisco, profits grew by 32 percent to five billion dollars. Here, net interest income soared by 45 percent. JP Morgan shares are up 5% in premarket trading and Wells Fargo is up 2%.
With their diversified business models and a comparatively thick capital buffer, the big financial institutions have survived the recent banking turbulence better than American regional banks. In this segment, the collapse of the Silicon Valley Bank has unsettled many savers. They then withdrew their funds from US regional institutions and carried them to big banks like JP Morgan. In mid-March, Deutsche Bank boss Christian Sewing also reported an inflow of deposits, saying there was a “flight to quality”.
Nevertheless, deposits at JP Morgan fell by eight percent across the group at the start of the year – also because customers needed the money to make a living due to high inflation. Deposits at Wells Fargo shrank by seven percent.
The US Federal Reserve has pushed interest rates up from near zero to a range of 4.75 to 5.00 percent over the year to contain high inflation and cool down the overheated labor market. However, the side effects of the interest rate hikes are also reflected in the balance sheets of the large institutes.
>> Read here: Consequences of the banking crisis – US central bankers expect recession in the coming months
JP Morgan increased loan loss provisions by 56 percent to $2.3 billion, and Wells Fargo set aside $1.2 billion after releasing $787 million in provisions last year.
JP Morgan boss Jamie Dimon said the US economy remains healthy overall. “Consumers continue to spend,” noted Dimon. “Companies are in good shape.” But storm clouds remained on the horizon. Financing conditions are expected to tighten as banks become more restrictive on lending.
While retail banking continues to thrive — JP Morgan’s CCB division grew profits 80 percent to $5.2 billion — stock placements and M&A advisory are ailing. At JP Morgan, investment banking revenues fell 24 percent to $1.6 billion. Equity trading revenues shrank 12 percent while fixed income trading flat.
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