JPMorgan boosts outlook for lending profits as deposits jump $37bn

JPMorgan Chase expects to increase the profits it makes from lending and said that deposits had jumped by $37bn in the first quarter, following the collapse of Silicon Valley Bank.

Net income rose 52 per cent from a year ago to $12.6bn, or $4.10 per share in the first quarter, boosted by a rise in profits from its consumer business, the lender reported on Friday. This exceeded analysts’ estimates for quarterly net income to be up at $10.46bn, or $3.39 per share, according to consensus data compiled by Bloomberg.

JPMorgan reported net interest income — the difference in what banks pay on deposits and what they earn from loans and other assets — of $20.8bn, up 49 per cent year on year. The US bank said it now expected net interest income for 2023, excluding its trading division, to be about $81bn, up from about $74bn previously, underscoring the financial upside for banks from the Federal Reserve lifting interest rates.

The rosier outlook and profit surge lifted the bank’s shares by about 6 per cent in pre-market trading in New York.

Oppenheimer analysts wrote in a note that JPMorgan “solidly trounced” its own guidance and investor expectations in the first quarter.

JPMorgan’s chief executive Jamie Dimon said the US economy “continues to be on generally healthy footings”, adding that consumers were in a healthy financial position and were still spending.

“However, the storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks,” Dimon said in a statement.

JPMorgan’s total deposits rose during the first three months of 2023 to $2.38tn, up from $2.34tn at the end of 2022, bucking analysts’ estimates that deposits would fall. The collapse of SVB in March triggered a rush of inflows from smaller banks.

It is the first quarter in a year that JPMorgan has seen net gains in deposits. The bank said its average deposit levels during the quarter fell 3 per cent to $2.3tn.

The swift flight of cash out of SVB, Signature Bank and other small and midsize lenders has focused investor attention on falling deposit levels across the industry, as it threatens to sap banks of their cheapest source of funding and constrain their ability to lend.

US banks have been hit by outflows over the past year as customers left in search of higher returns from alternatives such as money market funds, after US lenders failed to pass on significantly higher interest rates even as the Fed aggressively stepped up its tightening campaign to keep inflation in check.

JPMorgan also reported a net reserve of $1.1bn for credit losses.

The bank, an industry bellwether, is reporting earnings along with Citigroup and Wells Fargo, while Bank of America reports results on Monday. Goldman Sachs and Morgan Stanley, whose businesses skew more towards investment banking, trading and asset management, report earnings on Tuesday and Wednesday respectively.