Big Banks Beat Expectations As Earnings Report Season Opens

Earnings report season kicked off Friday, with two of the nation’s two largest banks — JPMorgan Chase and Bank of America — reporting better-than-expected results for the fourth quarter of 2022 thanks in part to higher interest rates.

JPMorgan Chase, the nation’s largest bank by assets, reported strong earnings, posting fourth-quarter net income of $11.01 billion, or $3.57 per diluted share, up from $10.4 billion, or $3.33 per diluted share in the same quarter last year. Net revenue increased to $35.57 billion from $30.35 billion a year earlier.

Both figures beat analysts’ expectations for earnings of $3.08 per diluted share and for revenue of $34.35 billion, according to FactSet.

Net interest income excluding markets was $20 billion, up 72% primarily due to higher rates.

While JPMorgan Chairman & CEO Jamie Dimon was pleased with the results, he issued a warning about the nation’s economy in 2023.

“The U.S. economy currently remains strong, with consumers still spending excess cash and businesses healthy,” Dimon said. “However, we still do not know the ultimate effect of the headwinds coming from geopolitical tensions — including the war in Ukraine; the vulnerable state of energy and food supplies; persistent inflation that is eroding purchasing power and has pushed interest rates higher; and the unprecedented quantitative tightening. We remain vigilant and are prepared for whatever happens, so we can serve our customers, clients and communities around the world across a broad range of economic environments.”

Bank of America, the nation’s second-largest bank by assets, also posted strong results, reporting four-quarter net income of $7.1 billion, or $0.85 per diluted share, compared to $7 billion, or $0.82 per diluted share, for the same quarter last year. The four-quarter results beat analysts expectations of 77 cents per diluted share, according to FactSet.

Revenue totaled $24.5 billion, up 11% from a year earlier. Net interest income rose $3.3 billion, or 29%, to $14.7 billion, driven by higher interest rates and loan growth, though that fell just  below analyst expectations of $14.9 billion, according to StreetAccount.

Noninterest income of $9.9 billion fell $799 million, or 8%, as declines in investment banking and asset management fees, as well as lower service charges, more than offset higher sales and trading revenue, the bank said.

The bank said total client balances of $3.4 trillion decreased 12%, driven by lower market valuations. It reported that average loans and leases of $225 billion increased $20 billion, or 10%, driven by residential mortgage lending, custom lending, and securities-based lending. It was the bank’s 51st consecutive quarter for average loans and lease balance growth.

Bank of America Chairman and CEO Brian Moynihan said the bank ended the year on a strong note.

“The themes in the quarter have been consistent all year, as organic growth and rates helped deliver the value of our deposit franchise,” he said. “That, coupled with expense management, helped drive operating leverage for the sixth consecutive quarter. Our earnings of $27.5 billion for the year represent one of the best years ever for the bank, reflecting our long-term focus on client relationships and our responsible growth strategy.”

Both banks benefitted from the dramatic rise in interest rates last year, as the Federal Reserve sought to tighten monetary policy to battle rampant inflation. The Federal Open Market Committee (FOMC) raised the benchmark federal funds rate from zero at the start of 2022 to a target range between 4.25% and 4.5%. 

The FOMC is scheduled to meet again at the end of the month to decide whether to continue raising rates.