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J.P. Morgan Chase on Friday reported record first-quarter profit and revenue that exceeded analysts' expectations as the bank benefited from higher interest rates.
The company said profit rose 5 percent to $9.18 billion, or $2.65 a share, compared with analysts' average estimate of $2.35 a share. Revenue also rose 5 percent to $29.9 billion, exceeding estimates by about $1.5 billion as net interest income grew 8 percent, thanks to the "impact of higher rates," J.P. Morgan said in a release. The boost was evident in the bank's huge retail lending business, where profit surged 19 percent to $3.96 billion.
Shares rose 4.2 percent, heading for the biggest one-day increase since November 2016.
"We had record revenue and net income, strong performance across each of our major businesses and a more constructive environment," CEO Jamie Dimon said in a statement.
"Even amid some global geopolitical uncertainty, the U.S. economy continues to grow, employment and wages are going up, inflation is moderate, financial markets are healthy and consumer and business confidence remains strong."
J.P. Morgan, the biggest U.S. bank by assets, is the first major lender to report earnings. Its results may allay fears about the sector after the Federal Reserve signaled it was pausing rate hikes for the remainder of the year. Combined with signs of a global economic slowdown, the central bank's actions punished bank stocks because the inverted yield curve crimps the industry's profit margins and signals a possible recession on the horizon.
But J.P. Morgan's results showed that it still benefited from the Fed's last move to hike its benchmark rate in December, the fourth time it raised rates last year.
That was most clear in the bank's consumer lending division, one of the two biggest segments for the company. Profit rose 19 percent to $3.96 billion as revenue climbed 9 percent to $13.8 billion. The division grew the profit margin on deposits and grew loans across credit card and auto units. Meanwhile, the provision for credit losses stayed flat from a year earlier at $1.3 billion.
The company, led by Dimon since 2005, has resumed its pattern of exceeding analysts' profit expectations. In the fourth quarter, the bank under-delivered after beating expectations for 15 straight quarters on tough trading results.
The bank said in February that first-quarter trading revenue was headed for a "high-teens" percentage drop from a year earlier as both equities and fixed income desks struggled amid slower client activity.
That warning proved true. In J.P. Morgan's investment bank, the biggest in the world by revenue, first-quarter trading revenue dropped 17 percent to $5.5 billion. Excluding the impact of a year-earlier accounting change, bond trading declined 8 percent and stock trading revenue dropped 13 percent. Banking revenue rose 8 percent to $3.2 billion on higher debt underwriting and advisory fees. The overall division's profit of $3.25 billion was 18 percent lower than a year earlier.
J.P. Morgan's asset management division said profit dropped 14 percent to $661 million on lower market levels and brokerage activity in the quarter. The firm's commercial bank posted profit of $1.05 billion, 3 percent higher than a year earlier.
Nonetheless, the bank continued making long-term investments in its business. J.P. Morgan said it's expanding its branch network to cover nearly all of the U.S. population by 2022. It also announced the first cryptocurrency from a major U.S. bank, and pledged $350 million to boost the job prospects of people in under-served communities.
Here's what Wall Street expected:
Earnings: $2.35 per share, a 0.7% decline from a year earlier, according to Refinitiv.
Revenue: $28.4 billion, a 0.3% decline from a year earlier.
Net Interest Margin: 2.57%, according to FactSet
Trading Revenue: Fixed income $3.64 billion, Equities $1.76 billion
Wells Fargo also reported earnings Friday, beating expectations on strong consumer lending.