JP Morgan beat expectations again as it reaped the rewards of rising interest rates and its takeover of First Republic, but the bank boosted loss provisions significantly.
In the second quarter, the Wall Street giant recorded net income of $14.5bn, 67 per cent higher than last year and ahead of analyst expectations.
Its shares were trading over three per cent higher ahead of market open.
The jump largely came thanks to a significant rise in net interest income, which increased 38 per cent to $21.9bn. Net interest income is the difference between what banks earn in interest payments and the expense of interest bearing products.
JP Morgan also lifted its full year net interest income, excluding markets, to around $87bn from around $84bn
JP Morgan’s acquisition of First Republic earlier this year also helped to lift performance. Income attributable to First Republic in the quarter was $2.4bn.
All divisions of the bank, including investment banking, saw an increase in profit compared to last year.
The bank’s retail arm recorded the most significant increase, with profit climbing 71 per cent including the impact of the First Republic acquisition. This was mainly due to a big rise in revenue from retail banking and wealth management.
Despite the global downturn in dealmaking, JP Morgan’s corporate and investment bank recorded a 10 per cent increase in net income. Although investment banking fees were lower, payments revenue climbed 61 per cent.
However, across the bank as a whole credit loss provisions more than doubled to $2.9bn from $1.1bn last year. The bulk of this increase came in commercial and retail banking.
The increase in provisioning reflects an increasingly uncertain economic environment with chief executive Jamie Dimon warning of the “salient risks in the immediate view“.
“Consumers are slowly using up their cash buffers, core inflation has been stubbornly high (increasing the risk that interest rates go higher, and stay higher for longer), quantitative tightening of this scale has never occurred, fiscal deficits are large, and the war in Ukraine continues, which in addition to the huge humanitarian crisis for Ukrainians, has large potential effects on geopolitics and the global economy,” he commented.
The results come shortly after the worst banking crisis to hit the US since the financial crisis in 2008. JP Morgan emerged from the mini banking crisis earlier this year stronger than ever after its acquisition of First Republic.
Despite the acquisition, the bank’s CET1 capital ratio, a measure of a bank’s financial strength, stood at 13.8 per cent. Dimon described this as an “extraordinarily strong” position.