Concerns among analysts about the slowdown in global economy would weigh down on its results were negated by JPMorgan Chase & Co as it reported a better-than-expected quarterly profit for the first quarter of the current year.
Good performance across its business sectors was shown by the largest U.S. bank by assets. The performance was driven by robust US economic growth, moderate inflation and strong consumer and business confidence, said the bank’s Chief Executive Jamie Dimon.
In recent month, the performance of the US banks have been below the average of the broader market because of concerns of an impending recession and quesitons and apprehensions being raised over a flattening yield curve and slowing housing market. But the loan growth as exhibited by the bank executives effectively doused those fears.
“There is no law that says it has to stop,” Dimon said when asked if the decade-long economic expansion is due to turn into a recession. “I wouldn’t count on there having to be a recession in the short run.”
There was a 4 per cent year on year growth in loans for the first quarter at JPMorgan’s consumer banking division. Total revenue generated increased by 4.7 per cent at $29.85 billion. According to IBES data from Refinitiv, analysts had expected revenue of $28.44 billion.
“We’ve been generally quite optimistic about the outlook for the economy,” Chief Financial Officer Marianne Lake told reporters on a call to discuss the results. “It doesn’t diminish the fact that there are a number of risks out there. Right now we don’t see that playing out in the data.”
One of the crucial KPIs of profitability was the bank’s net interest margin which increased by only 0.02 per cent compared to the fourth quarter, which was at a pace slower than in the two previous quarters. There are concerns among investors about whether there has been a peaking of net interest margins because of the signalling by the US Federal Reserve that short term rates are most likely not to be increased this year and the narrowing of the spread between short- and longer-term rates.
Unlike Wells Fargo & Co, the other big U.S. bank to report earnings on Friday, JPMorgan stood by its outlook for net interest income, a key driver of profits, which it expects to increase about 4 percent this year over 2018.
Lake downplayed questions about whether the bank’s $90 million provision for credit losses in its commercial banking segment in the first quarter was a reason for concern. “These downgrades were idiosyncratic. It was a handful of names” of diverse commercial and industrial borrowers, she said. “We are not seeing signs of deterioration.”
The stocks of the bank increased by 3.6 per cent in the morning trade.
The net income of the bank touched a record $9.18 billion, or $2.65 per share, the bank said during the quarter ended March 31, compared to $8.71 billion, or $2.37 per share, in the same quarter a year ago.
(Adapted from Reuters.com)