Wall Street has high hopes for banks this year as the industry recovers from the worst effects of the pandemic.
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JPMorgan Chase posted first-quarter results that blew past forecasts. That didn’t prevent the bank’s stock from falling in premarket trading early Wednesday morning.
The bank posted net income of $14.3 billion in the first quarter, driven by a $5.2 billion release of credit reserves. First-quarter figures eclipsed net income from the year-ago quarter by nearly 400% when JPMorgan (ticker: JPM) added $6.8 billion to reserves in anticipation of a wave of pandemic-related defaults. The bank’s allowance for credit losses stands at $25.6 billion–roughly in line with where it was last year.
Revenue totaled $32.3 billion, well ahead of the $30.5 billion expected by analysts. Earnings per share totaled $4.50, beating expectations of $3.09 per share. Return on common tangible equity (ROTCE) was 29%, up from 5% a year ago. Excluding the reserve release and a $550 million contribution to the firm’s foundation, net income totaled $10.6 billion, or $3.31 per share, and ROTCE was 21%.
Shares of the bank fell as much as 1.7% in premarket trading. Wall Street has high hopes for banks this year as the industry recovers from the worst effects of the pandemic. Banks have begun to recover from the immediate shock of near-zero interest rates and the economic impact of the pandemic has been better-than-feared by the largest banks, allowing them to release reserves.
JPMorgan shares are up more than 21% year to date, beating the 10% gain in the S&P 500. The bank’s chairman and chief executive Jamie Dimon has been confident that the good economic times can continue thanks to fiscal and monetary policy.
“With all of the stimulus spending, potential infrastructure spending, continued Quantitative Easing, strong consumer and business balance sheets and euphoria around the potential end of the pandemic, we believe that the economy has the potential to have extremely robust, multi-year growth,” Dimon said in a statement this past week.
Revenue in the bank’s consumer and community segment was $12.5 billion, down 6% from last year. Net income increased by $6.5 billion to $6.7 billion as the bank released $4.6 billion of reserves. Net charge-offs were $1 billion. The segment also saw deposits climb 36% year over year as clients continue to hoard cash while loan growth was down 7%.
JPMorgan’s corporate and investment bank continues to be a bright spot. Revenue was $14.6 billion, up 46% from last year as deal-making activity returned after a slump in last year’s first quarter. Investment banking revenue was up more than 200% while trading activity–which was already elevated last year–climbed 25%. Fixed-income trading was up 15% and equities trading was up 47%.
Goldman Sachs (GS) and Wells Fargo (WFC) also report results Wednesday. Bank of America (BAC) and Citigroup (C) report Thursday and Morgan Stanley (MS) reports Friday.
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