JPMorgan Chase & Co. (JPM), the largest U.S. bank by assets, is the first among a lineup of mega banks to unveil first quarter results this week as earnings season kicks off.
The company has been a strong outperformer in the banking sector, which lagged the broader market meaningfully this year amid concerns over U.S. bank ties to Russia and worries of an economic slowdown. Still, shares of JPMorgan are down 18.7% year to date.
JPMorgan released its quarterly results Wednesday. Here were the key figures versus expectations, according to analysts polled by Bloomberg.
Revenue (adjusted): $31.59 billion vs. $31.44 billion expected, $30.35 billion in Q4
Earnings per share (adjusted): $2.63 per share vs. $2.72 expected, $3.33 per share in Q4
Wednesday’s report reflected a lackluster quarter for the banking powerhouse following a volatile start to the year on Wall Street as the Russia-Ukraine war and economic uncertainty weighed on markets.
JPMorgan reported a lower-than-expected net income for the first quarter of $8.3 billion, or $2.63 per share, down 42% from the same period in 2021 when the bank posted a profit of $14.3 billion, or $4.50 per share.
Investment banking also came in short of analyst estimates at $2.1 billion versus $2.25 billion expected as geopolitical tensions in Eastern Europe stalled deal activity in the first quarter. Investment banking fees were down 31% due to lower equity and debt underwriting activity, the bank said, marking the lowest fees recorded since the first quarter of 2021.
Shares of JPMorgan dropped as much as 3% in pre-market trading.
“We remain optimistic on the economy, at least for the short term but see significant geopolitical and economic challenges ahead due to high inflation, supply chain issues and the war in Ukraine,” CEO Jamie Dimon said in a statement.
The banking giant also reported adding $902 million in credit reserves for potential loan losses, warning of “higher probabilities of downside risks.”
In the same quarter last year, bank profits benefited significantly from strong dealmaking activity and the release of funds set aside for potential COVID losses.
The bank reported improving loan growth, with average loans up 5%.
Among metrics that will be closely watched by investors this year is the company’s net interest income, the difference between the bank’s earnings on its lending activities and interest it pays to depositors. The figure stands to benefit from higher interest rates, but if the Federal Reserve hikes rates too aggressively and tips the economy into a recession JPMorgan’s lending activity may take a hit.
Net interest income during the first quarter was $14.0 billion, up 7%, the bank reported, citing balance sheet growth and higher rates.
Dimon recently warned in his closely-read annual letter to shareholders earlier this month that Russia’s ongoing invasion of Ukraine is expected to meaningfully slow the U.S. and global economy.
The bank chief also said in the letter JPMorgan may take a $1 billion loss over time due to the war. However, Dimon did not elaborate on an exact time frame or how the estimate was calculated. Although the bank said it is not worried about its direct exposure to Russia, the institution is concerned about the “secondary and collateral effects” the crisis and sanctions pose on so many companies and countries.
JPMorgan economists predict U.S. gross domestic product (GDP) will advance roughly 2.5%, compared to the institution’s initial forecast of 3%. During a call with journalists after the bank reported earnings on Wednesday, Dimon said he was not predicting a recession, but that one was “absolutely” possible.
More bank reports are due out before markets open Thursday from Wells Fargo (WFC), Goldman Sachs (GS), Morgan Stanley (MS), and Citigroup (C).
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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