JPMorgan’s Profit Rises, but Higher Interest Rates Start to Sting

JPMorgan Chase’s first-quarter earnings rose 6%, but the bank said Friday that higher interest rates are starting to dent its business and projected muted growth for the rest of the year.

Profit jumped to $13.42 billion, or $4.44 a share, compared with $12.62 billion, or $4.11 a share, a year earlier. Analysts had forecast $4.17 a share.

Revenue rose to $41.93 billion, up 9% from $38.35 billion. Analysts had forecast $41.69 billion.

JPMorgan’s earnings from lending jumped to $23.08 billion, up 11% from a year earlier. It was a decline compared with last quarter and slightly less than the $23.13 billion analysts had expected.

The bank projected its full-year net interest income, the difference between what it earns on loans and securities minus what it pays depositors, would be flat from last year, reflecting growing pressure on banks’ lending businesses from higher interest rates.

Higher interest rates had led to record JPMorgan profits because the bank charged more on loans but only slowly raised what it paid on customers’ deposits. Now, as high rates persist, customers are shifting their deposits out of zero-to-low interest rate checking and savings and into higher-yielding products like certificates of deposit, which will compress the bank’s profit margins, Chief Financial Officer Jeremy Barnum said on a call with reporters.

The bank’s shares fell more than 3% in premarket trading Friday.

In the corporate and investment bank, revenue was basically flat with the prior year. Investment banking fees were up 21% to $2 billion, compared with $1.7 billion a year earlier. Most of the jump in fees came from debt underwriting, while advisory fees were down.

Barnum said some of that activity might reflect opportunistic borrowing as companies took advantage of lower yields in the capital markets at the start of the year. Investment banks have struggled with a dearth of deal activity since the Federal Reserve spiked rates in 2022.

“We’re still on the recovery path in investment banking overall,” he said.

In the consumer bank, revenue rose 7% and profit fell 8%.

Deposits at the bank rose 2% to $2.43 trillion.

Companywide expenses were $22.8 billion for the latest quarter, up 13% from a year earlier. JPMorgan guided that full-year expenses would be $91 billion, up from around $87 billion last year.

The bank also reported a $750 million charge levied by the Federal Deposit Insurance Corp. related to the cleanup costs for last year’s bank failures.

After taking in record profits in 2023, banks face growing pressures this year. Losses from commercial real estate and bond portfolios are mounting, and an expected plateau in interest rates means that profit margins are likely to come under more pressure.

JPMorgan has weathered some of those challenges better than its peers. It has still increased its earnings from lending while its competitors are seeing a drop. It has also been able to rely on noninterest income from businesses such as investment banking and asset management.

“We’re earning a lot of money,” Chief Executive Jamie Dimon said on a call with analysts on Friday.

Dimon, who is marking his 20-year anniversary with the firm this year, recently told shareholders that he thinks the battle against inflation is far from over and could see interest rates going to 8% or higher.

However, he said on Friday that for the most part, the American consumer remained strong overall, as evidenced by growth in spending.

Customer spending on JPMorgan Chase credit cards rose 9% in the quarter from a year earlier, but slipped from the end of last year.

While Dimon has been flagging that he harbors concerns about the future of the economy, JPMorgan reduced the amount of money it had set aside for potential loan defaults in the future even as charge-offs rose in the quarter.

The hotter-than-expected inflation March report means that the Federal Reserve is likely to hold off on cutting interest rates for now, which will likely exacerbate the financial pressure that banks are currently feeling.

Write to Alexander Saeedy at [email protected]