Big banks started off earnings season with a bang despite concerns of contagion from the second and third largest failures in American history. The nation’s largest financial institutions reaped the benefits of the Federal Reserve’s aggressive rate hike campaign.
The nation’s largest bank easily beat Wall Street expectations. JPMorgan Chase said profit surged 52% to $12.62 billion in the first quarter of 2023. The company’s revenue rose by 25% to $39.34 billion.
Following the collapse of Silicon Valley Bank and Signature Bank in March, bank customers throughout the U.S. withdrew funds from smaller, regional banks and moved money to larger institutions. JPMorgan Chase secured an additional $37 billion in deposits in the first three months of the year.
All large banks that reported earnings Friday, April 14, posted large increases in net interest income, which measures what the bank makes lending money minus what it pays out to depositors. With the Federal Reserve hiking its interest rate from near zero early last year to nearly 5% in April, banks have been charging higher interest rates for loans, increasing that cushion. In Chase’s case, one of its biggest highlights was a 49% rise in that net interest income for the quarter.
The country’s third-largest bank, Citigroup, also beat projections with revenue up 12% from the first quarter of 2022. Citigroup’s net interest income rose 23% to $13.3 billion on the back of higher interest rates.
Wells Fargo’s revenue rose 17% from the first quarter of 2022. The country’s fourth-largest bank said its net interest income increased by 45% as well. Non-interest income fell by 13%, which the bank said was due to “a decline in mortgage banking income on lower originations.” Earlier in 2023, Wells Fargo laid off hundreds of mortgage bankers as it shifted priorities.
PNC Financial Services Group reported revenue was up 19% to $5.6 billion. The Pittsburgh-based institution also benefited from higher rates with net interest income up 28%.
Despite the banner quarter, executives warned of tougher times ahead as the banks reported setting aside more cash to prepare.
“The storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks,” JPMorgan Chase CEO Jamie Dimon said.
