NEW YORK: JPMorgan Chase reported a jump in first-quarter profits Friday, but warned again of a potential economic downturn as it added $1.1 billion in reserves in case of bad loans.
The bank, the biggest US lender in terms of assets, reported a 52 percent surge in profits to $12.6 billion on record revenues of $38.3 billion, up 25 percent from the year-ago level.
Shares powered higher on the report, which easily topped analyst expectations.
The additional reserves were taken due to “a deterioration in the weighted-average economic outlook” and “an increased probability of a moderate recession due to tightening financial conditions,” the bank said in an earnings release.
Results were boosted by much higher net interest income, as the big US bank benefited from a rising interest rate environment that enables it to charge more for loans.
JPMorgan’s dealmaking flurry being scrutinized by US regulator: FT
Recent banking industry turmoil following the collapse of Silicon Valley Bank raised worries about a flight of deposits, but that was seen as more of a concern for midsized banks.
JPMorgan Chase reported a drop in deposits compared with the year-ago period, but an uptick compared with the prior quarter.
Chief Executive Jamie Dimon said the US economy remained on “generally healthy footing,” with consumers still spending and businesses in good shape.
“However, 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,” Dimon said.
“The banking situation is distinct from 2008 as it has involved far fewer financial players and fewer issues that need to be resolved, but financial conditions will likely tighten as lenders become more conservative, and we do not know if this will slow consumer spending.”
While the banks hope the clouds clear, JPMorgan “is prepared for a broad range of outcomes,” Dimon said.
Shares of JPMorgan gained 6.1 percent to $136.80 in pre-market trading.
Two other banks that reported, Wells Fargo and PNC Financial, also climbed, as investors breathed a sigh of relief at no obvious red flags in the heavily scrutinized sector.