JP Morgan Beats Second Quarter Estimates, 2023

JP Morgan Chase reported second-quarter earnings results that beat analysts’ expectations as the largest bank in the U.S. benefited from higher interest rates and strong growth in consumer banking.

Net income increased 67% to $14.5 billion, or $4.75 per share, compared with $8.65 billion, or $2.76 per share, in the year-ago period, the company said on July 14 in its quarterly results. Revenue jumped 34% to $42.4 billion as net interest income surged 44% to $21.9 billion, which topped the StreetAccount estimate by roughly $700 million.

“Almost all of our lines of business saw continued growth in the quarter,” Chairman and CEO Jamie Dimon said. “In consumer & community banking, new checking account production was very strong, while card loans were up 18%.”

The bank reported adjusted earnings per share of $4.37, excluding the impact of the First Republic purchase in early May. These included a $2.7 billion “bargain purchase gain” from the government-brokered takeover, as well as loan reserve builds and securities losses tied to the purchase. The Refinitiv estimate was for second quarter earnings per share of $4.

Quarterly net income from consumer banking jumped 71% to $5.3 billion, while net revenue increased 37% to $17.2 billion, according to the bank’s quarterly results. Average loans were up 13%, while average deposits were down 6%.

“The results were outstanding and really showed strength across the board,” Octavio Marenzi, CEO of consultancy Opimas, said in an interview with CNBC. “Consumer banking was particularly strong, but even investment banking, which has been a problem child over the past year or so, is starting to show signs of life.”

Fixed income trading revenue dipped 3% to $4.6 billion, topping the StreetAccount estimate by nearly $500 million. Equity trading revenue of $2.5 billion edged out the $2.41 billion estimate. And investment banking revenue of $1.5 billion topped the $1.42 billion estimate.

Resilient

The biggest US banks presented a picture of a resilient economy, with consumers and businesses continuing to spend and borrow even after a lightning-fast rise in interest rates. Wells Fargo’s profit jumped 57% due to lending at higher rates, while Citigroup reported an increase in net interest income, though its profit fell 36%. All three banks beat analysts’ expectations for profit and revenue.

JP Morgan said it expected fiscal 2023 net interest income and net interest income, excluding markets, of $87 billion. It forecast fiscal year 2023 adjusted expenses of about 84.5 billion.

While Dimon remained positive about the health of the US economy, he also said there were risks in the immediate future.

“The U.S. economy continues to be resilient,” Dimon said. “Consumer balance sheets remain healthy, and consumers are spending, albeit a little more slowly. Labor markets have softened somewhat, but job growth remains strong. That being said, there are still salient risks in the immediate view—many of which I have written about over the past year.”

The banks’ second-quarter results underscored the diverging performance of US lenders this year, with the country’s largest attracting new customers and making loans, Bloomberg reported. In contrast, turmoil struck small- and medium-size banks as rising interest rates eroded the value of assets on their balance sheets. Corporate clients and wealthy customers shifted deposits to banks perceived as stronger, one of the factors that led to the collapse of Silicon Valley and First Republic banks.