JPMorgan reports record annual profits on interest rate windfall

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JPMorgan Chase reported record profits in 2023 thanks to a windfall from rising interest rates, and predicted that earnings from lending would continue to grow this year even as the Federal Reserve is expected to start cutting rates.

The largest US bank reported fourth-quarter net income of $9.3bn, down from $11bn a year earlier.

Despite the slowdown, JPMorgan still booked record full-year net profits of $49.6bn, up 32 per cent from 2022 and ahead of the previous high of $48.3bn set in 2021.

Fourth-quarter earnings were hit by the bank having to pay $2.9bn as part of a so-called special assessment by US bank regulators to recover losses resulting from the failures of several lenders last year, including Silicon Valley Bank. The figure was in line with previous guidance by JPMorgan.

JPMorgan’s shares were up 2.3 per cent in pre-market trading in New York.

Big banks have reaped the benefits of rising interest rates, charging borrowers more for loans without passing on the increase in full to depositors.

JPMorgan in particular has benefited from its size and savers’ perception that it is implicitly guaranteed by the government because of its systemic importance to the economy.

That has enabled it to resist the kind of increases in savings rates smaller banks have had to offer to retain deposits.

JPMorgan reported net interest income — the difference between what it pays on deposits and what it earns from loans and other assets — of $89.7bn for the year, ahead of its target for about $88.5bn.

The bank told investors it expected NII for 2024 of about $90bn, saying growth in loans would more than offset the impact from the Fed starting to cut rates again and savers continuing to shift to higher rate deposit accounts.