JPMorgan profit jumps on higher interest income as First Republic lifts earnings

By Niket Nishant and Nupur Anand

(Reuters) -JPMorgan Chase posted a 67% jump in profit for the second quarter on Friday as it earned more from borrowers’ interest payments and benefited from the purchase of First Republic Bank (OTC:).

Shares of the largest U.S. lender rose 2.4% in premarket trading as it kicked off second-quarter results for the big U.S. banks and CEO Jamie Dimon reassured investors that the economy remained resilient.

“Consumer balance sheets remain healthy, and consumers are spending, albeit a little more slowly. That being said, there are still salient risks in the immediate view” such as consumers using up their cash buffers, high inflation, quantitative tightening the war in Ukraine, he said in a statement.

The bank bought a majority of failed First Republic Bank’s assets in a government-backed deal in May after weeks of industry turbulence.

That bolstered its net interest income (NII), which measures the difference between what banks earn on loans and pay out on deposits.

The bank’s NII jumped $21.9 billion, up 44%, or up 38% excluding First Republic.

The bank sees NII of about $87 billion for the full year, higher than the $83.37 billion expected by Wall Street, according to Refinitiv IBES data.

JPMorgan (NYSE:)’s profit climbed to $14.47 billion, or $4.75 per share, for the quarter ended June 30. That compares with $8.65 billion, or $2.76 per share a year earlier.

“It was very hard to find anything wrong with JP Morgan’s earnings… Consumer banking was particularly strong, but even investment banking, which has been a problem child over the past year or so, is starting to show signs of life,” said Octavio Marenzi, CEO of consultancy firm Opimas.

The results come against the backdrop of a possible end to Federal Reserve’s rate hikes that have swelled profits at big U.S. banks in the past few quarters.

Dimon has cautioned against premature optimism on inflation, and said that the federal funds rates could go up to as much as 6% or 7%.

The rate currently stands in the 5% to 5.25% range, and investors are largely expecting just one more 25 basis points hike this year.

While the monetary tightening campaign has stalled mergers and acquisitions – another major source of income for banks, a flurry of initial public offerings has raised hopes of a nascent recovery in capital market activity.

Johnson & Johnson (NYSE:)’s consumer health unit Kenvue and U.S. restaurant group Cava have pulled off strong market debuts in New York this year.

Investment banking revenue for the quarter was $1.5 billion, up 11% from last year. Markets revenue fell 10%, with both fixed income and equities trading taking a hit.

Sluggish trading revenues have prompted investment banks to trim their headcount as they rush to cut expenses. JPMorgan plans to cut around 500 jobs across different divisions, according to a source familiar with the matter told Reuters in May.

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