The banking crisis doesn’t seem to have had much negative impact on two of the nation’s largest banks.
Both JPMorgan Chase & Co., the nation’s largest bank by assets, and Wells Fargo, the fourth-largest U.S. bank, reported strong results on Friday for the first quarter of 2023.
New York-based JPMorgan reported first-quarter net income of $12.62 billion, or $4.10 per diluted share, up 14.6% from the fourth quarter of 2022 and 52% from the first quarter of last year.
The results beat analysts' expectations of $3.41 per share, according to Zacks Investment Research.
Net revenue was $39.3 billion, up 25%, while net interest income (NII) was $20.8 billion, up 49%, the bank said. NII excluding Markets was $20.9 billion, up 78%, “predominantly driven by higher rates, partially offset by lower deposit balances compared to the prior year,” the bank said.
JPMorgan also saw an increase in home lending during the quarter, reporting a volume of $720 million, up 23.3% from the fourth quarter. The result, however, was down 38.4% from a year earlier, which the bank said was “largely driven by lower net interest income from tighter loan spreads and lower production revenue due to lower volume.”
Storm Clouds Remain
JPMorgan Chairman & CEO Jamie Dimon said that while the U.S. economy continues to be “on generally healthy footings,” noting that consumers are still spending and businesses are healthy, storm clouds remain on the horizon “and the banking industry turmoil adds to these risks.”
“The banking situation is distinct from 2008,” he said, “as it has involved far fewer financial players and fewer issues that need to be resolved, but financial conditions will likely tighten as lenders become more conservative, and we do not know if this will slow consumer spending”
He added, “We also continue to monitor for potentially higher inflation for longer (and thus higher interest rates), the inflationary impact of continued fiscal stimulus, the unprecedented quantitative tightening, and geopolitical tensions including relations with China and the unpredictable war in Ukraine. While we hope these clouds will dissipate, the firm is prepared for a broad range of outcomes, and we are confident that we can serve the needs of our customers and clients in all environments.”
Wells Fargo
Like JP Morgan, Wells Fargo & Co., also reported strong first-quarter earnings. The San Francisco-based bank reported a first-quarter profit of $4.99 billion, or $1.23 per share, up 58% from the fourth quarter of last year and up 32% from a year earlier.
The results also beat Wall Street expectations of $1.15 per share, according to Zacks Investment Research.
The bank posted revenue of $26.75 billion in the quarter. Its revenue net of interest expense was $20.73 billion, which also beat analyst forecasts of $20.08 billion, according to Zacks.
The quarter’s strong results were attributed in part to a 45% in net interest income, “due to the impact of higher interest rates, higher loan balances, and lower mortgage-backed securities premium amortization, partially offset by lower deposit balances,” the bank said.
“We had strong results in the first quarter, including revenue growth from both the fourth quarter and a year ago, and we continued to make progress on our efficiency initiatives,” said CEO Charlie Scharf.
While the bank continued dismantling its mortgage origination business, laying off hundreds of mortgage bankers across the country in February, its home lending business increased during the quarter. The bank reported total home lending of $863 million, up 9.8% from $786 million in the fourth quarter of last year. The total, however, was down 42% from a year earlier, attributed to lower originations “and lower revenue from the resecuritization of loans purchased from securitization pools.”
Nonperforming assets increased $379 million, or 7%, driven by higher commercial real estate nonaccrual loans, partially offset by lower residential mortgage nonaccrual loans, the bank said.
Scharf said Wells Fargo’s strong quarter positioned it to “help support the U.S. financial system during the recent events that impacted the banking industry,” a reference to the failures of Santa Clara, Calif.-based Silicon Valley Bank and New York-based Signature Bank in March.
“Regional and community banks are an important part of our financial system and are uniquely positioned to serve their customers and communities,” Scharf said. “We believe our own franchise offers many benefits, including operating at a broad scale with a large branch network. … Our diversified business model, strong capital position, mix of deposits, access to funding sources, and continued focus on financial and credit risk management allow us to support our customers throughout economic cycles.”
He said the bank continues to make progress on its “risk and control agenda, which is our top priority. While we have made progress, our work is not done, and we remain focused on completing the work in a timely fashion.”
He added, “At the same time, we are executing on our other strategic objectives, including developing improved products and services to better serve our customers, investing in our communities, and generating appropriate risk-adjusted returns.”
