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JPMorgan Chase reported record profits for 2023 and struck a comparatively bullish tone for the year ahead, widening the gulf between America’s biggest bank and its three closest rivals.
JPMorgan, Bank of America, Citigroup and Wells Fargo all reported quarterly earnings on Friday. JPMorgan was alone among the group in posting record net profits for the year of $49.6bn. That eclipsed the bank’s previous high of $48.3bn set in 2021.
The US’s largest banks have benefited from higher interest rates, charging borrowers more for loans without passing on the increase in full to depositors. But JPMorgan has emerged as the industry’s biggest winner, spurred on by its acquisition of failed regional lender First Republic.
Net interest income for the year — the difference between what it pays on deposits and what it earns from loans and other assets — climbed at all of the four banks.
But it jumped 34 per cent at JPMorgan to $89.7bn, more than double the increase of the next bank, Wells Fargo, which reported a 16.5 per cent rise. Citi reported a 13 per cent increase and BofA 8.5 per cent. JPMorgan also beat its own target for about $88.5bn.
JPMorgan executives have spent much of 2023 cautioning investors the bank has been “overearning” from NII, and warning the bank will eventually come under greater pressure to lift rates for savers.
The banks signalled on Friday that earnings from lending would now start to fall.
Excluding NII from its trading business, JPMorgan forecast the figure would drop by around 2 per cent this year to about $88bn, as growth in loans partially offset the twin impacts of a shift from rate rises to rate cuts and savers moving money to higher-paying deposit accounts.
“Despite the expected dissipation of the 2023 tailwinds, and the presence of significant economic and geopolitical uncertainties, we remain optimistic about this franchise’s ability to produce superior returns,” JPMorgan chief financial officer Jeremy Barnum told analysts.
That contrasted with Wells’ estimates for a 7 to 9 per cent decline in net interest income in 2024.
Fourth-quarter performance at all the banks was weighed down by one-off charges linked to a so-called special assessment by regulators to recover losses from the failures of several lenders last year, including Silicon Valley Bank. JPMorgan is on the hook for $2.9bn, BofA $2.1bn, Citi $1.7bn and Wells $1.9bn.
Wells Fargo was alone among the lenders in reporting a year-on-year increase in quarterly earnings, with net income up 9 per cent to $3.45bn as the San Francisco-based lender cut costs. But the downbeat outlook dragged its shares 3 per cent lower in mid-day trading.
Citi, which is in the middle of a major reorganisation, reported a $1.8bn loss after taking $4bn of charges, sending its shares down around 1.3 per cent.
Bank of America’s shares slipped just over 2 per cent after quarterly net income fell almost 60 per cent, worse than analysts polled by Bloomberg had anticipated.
JPMorgan’s net income for the final three months of the year dropped 15 per cent, to $9.3bn.
Chief executive Jamie Dimon said the US economy continued to be “resilient”, but cautioned that a combination of spending on the green economy, the restructuring of global supply chains and higher military spending might cause “inflation to be stickier and rates to be higher than markets expect”.