REUTERS: JPMorgan Chase & Co posted a better-than-expected quarterly profit on Friday, easing fears that slowing economic growth could weigh on its results.
The largest U.S. bank by assets showed strength across its businesses in the first quarter, driven by what Chief Executive Jamie Dimon described as solid growth in the U.S. economy, moderate inflation and strong consumer and business confidence.
U.S. bank stocks have underperformed the broader market in recent months on fears of an impending recession, with economists and investors citing concerns over a flattening yield curve and slowing housing market. But bank executives have downplayed concerns, pointing to continuing loan growth.
Loans in JPMorgan's consumer banking division rose 4 percent from a year ago. Overall revenue rose 4.7 percent to US$29.85 billion.
"We've been generally quite optimistic about the outlook for the economy," Chief Financial Officer Marianne Lake told reporters on a call to discuss the results. "It doesn't diminish the fact that there are a number of risks out there. Right now we don't see that playing out in the data."
The bank's net interest margin, a key measure of loan profitability, edged up only 0.02 percent point from the fourth quarter, a slower pace of improvement than in the two previous quarters.
Investors have been concerned that net interest margins may have peaked for the banks, since the Federal Reserve has signaled it is unlikely to raise short-term rates this year and the spread between short- and longer-term rates has narrowed.
Investors will be listening closely to what bank executives say about changes in their outlooks for interest margins in coming quarters, analyst Brian Kleinhanzl of Keefe, Bruyette & Woods wrote in a note ahead of the results.
There are other warning signs. JPMorgan's commercial banking segment made a US$90 million provision for credit losses in the first quarter primarily because of downgrades in the credit worthiness of what it called "select" commercial and industrial borrowers.
In the bank's capital markets business, equity underwriting fell 13 percent and bond trading revenues fell 8 percent from the year ago quarter. Bank executives had signaled earlier in the quarter that capital markets revenue could fall by a greater amount.
Shares of the bank were up 3.1 percent in early trading.
Analysts had expected revenue of US$28.44 billion, according to IBES data from Refinitiv.
JPMorgan's results kick off earnings for the big banks and are closely watched by investors for cues on the health of the U.S. economy and the financial system.
The bank said net income rose to a record US$9.18 billion, or US$2.65 per share, in the quarter ended March 31, from US$8.71 billion, or US$2.37 per share, a year earlier.
Net interest income rose 8 percent to US$14.60 billion, boosted by interest rate increases since the first quarter of last year.
Analysts had estimated earnings of US$2.35 per share, according to IBES data from Refinitiv.
(Additional reporting by David Henry and Matt Scuffham; Editing by Sriraj Kalluvila and Neal Templin.)