JPMorgan profits soar after bank releases bad debt reserves

JPMorgan Chase JPM 0.16%

& Co. posted an almost five-fold increase in quarterly profits, thanks to booming markets and an economic recovery that allowed it to free up $ 5.2 billion in funds it had set aside to cover bad loans.

The nation’s largest bank reported a record quarterly profit of $ 14.3 billion, or $ 4.50 per share, well above the $ 3.10 per share expected by analysts polled by FactSet. A year earlier, JPMorgan reported quarterly profit of $ 2.87 billion, or $ 0.78 per share. The bank reported revenue of $ 32.27 billion, up 14% from the previous year.

After the coronavirus pandemic took hold in the United States early last year, JPMorgan and other major banks set aside billions of dollars in loan loss reserves to prepare for a potential influx consumer and business failures. Rainy day funds generated quarterly profits for much of 2020. But big losses never materialized, and now banks are capitalizing on their diligence.

Wall Street also fed JPMorgan’s first quarter results. Corporate and investment bank profits nearly tripled to $ 5.74 billion, a quarterly record, and revenues rose 46% to $ 14.6 billion. Trading revenues are up 25% from a year ago and investment banking fees are up 57%.

The rebound in the US economy has exceeded internal bank forecasts. Banks believe the trillions of dollars in government stimulus slipping through the economy, coupled with accelerated vaccine delivery, have isolated consumers and businesses from the worst financial scenarios of the pandemic.

Jamie Dimon, CEO of JPMorgan, said the economy was set for a “Goldilocks moment”.


Sean Pressley for The Wall Street Journal

“The year has started well and a strong economic recovery is underway,” CFO Jennifer Piepszak said on a call with reporters Wednesday morning. “Of course, there are still risks and uncertainties that we are preparing for, as well as specific issues that we face.”

In his annual letter to shareholders last week, CEO Jamie Dimon said he believed the economy was ready for a “golden loop moment” of rapid growth, inflation and interest rates. which rose slowly.

The bank’s stock price reflects this change. JPMorgan shares have risen 19% year-to-date. The KBW Nasdaq Bank Index, which tracks the stocks of the largest lenders, is up more than 26% this year, compared to nearly 10% for the S&P 500.

The forces that pushed JPMorgan’s Wall Street operations to its best fourth quarter on record last year continued into the first few months of 2021. Record investments in blank check companies helped drive up fees. subscription of shares. Trillions of dollars in government stimulus have poured into Americans’ checking accounts, and some of it has ended up in the stock market.

The bank achieved a record $ 3 billion in investment banking fees in the first three months of the year. He expects a stronger economy, a loaded list of public offerings and high CEO confidence to provide a stable pipeline of deals, the head of the corporate banking unit said on Wednesday. investment by the bank, Daniel Pinto, in a note to employees.

Revenue fell 6% in JPMorgan’s sprawling consumer business. In asset and wealth management, turnover increased by 20%.

Total loans are about 4% lower than a year ago. Major U.S. lenders saw their loan portfolios shrink in 2020 for the first time in more than a decade, but banking executives say they expect demand to pick up later this year as the economy continues to shrink. recover.

Yet banks have been strangled over the past year by low interest rates, which limit what they can do with loans. The difference between what JPMorgan earns on loans and pays on deposits fell to 1.69% in the first quarter, from 2.37% a year ago.

Deposits jumped 6% from the previous quarter to $ 2.28 trillion.

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Write to Orla McCaffrey at [email protected]

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