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JPMorgan Takes Half-Billion Russia Loss, Mortgage Volumes Plunge
JPMorgan delivered mixed first quarter results on Wednesday, as earnings season kicked off in the US.
Adjusted revenue of $31.59 billion was a slight beat, but EPS of $2.63 was a miss and IB fell short.
Jamie Dimon described the bank's performance as "healthy." A net $902 million reserve build was a $0.23 drag on earnings. If you're looking for a culprit in explaining the 42% YoY drop in net income, that was it. Bank results were padded by reserve releases in the aftermath of the pandemic. Tha
Jamie Dimon never lets an opportunity to over-reserve go to waste— he likes having the ammo to smooth future earnings.
Has he ever under-reserved?
I found the consumer lending figures the most interesting. I’ll await more results, especially from the regionals, before declaring the notion that higher rates are good for bank earnings to be dead and buried.
Though there’ll be no surprise when some Wall Street pundits try to assert that JPM’s lending numbers confirm that consumers are “flush with cash” and have no need to borrow.
My observation is that the yield curve and credit conditions matter more than the absolute levels of rates. Credit conditions and economy are pretty good, however, the yield curve is mainly flat which is the first condition for banks to come under pressure. If credit conditions deteriorate that is step 2. Final nail in the coffin is an outright economic downturn. We are only at step 1 with a mainly flat yield curve- and the curve for the moment is steep in the very short end (as Powell continues to point out). The banks probably have another year before things really bite.
RIA – good point. The key to the old street “saw” that higher rats are good for bank earnings was based upon the idea that banks would actually step up their lending. That increasingly looks like a quaint old notion, akin to the Phillips and Laffer curves.
That’s partly due to all of those well-funded fintechs out there skimming off the most lucrative lending businesses.
Good article and good commentary- The most interesting question is this for banks- if the fintechs get in trouble will the fed let them die?
Has anyone figured out which bank this is?
https://www.americanbanker.com/news/a-big-bank-is-in-trouble-and-no-one-knows-which-one-or-why
It’s not one of the bulge bracket (they are much bigger).
If I had to guess, it would be Wells Fargo. Those folks are down there with Credit Suisse and HSBC selling ethics for pennies.