Booming profits for JP Morgan and Citi, with wartime trading and investment banking
The two prestigious US banks beat quarterly expectations, but JP Morgan CEO Jamie Dimon warns of a 'complex risk picture'
Multibillion-dollar profit haul for the US banking giants: JP Morgan and Citigroup, the first and third largest US institutions by assets, posted above-expected performances in the first quarter of the year, on the back of intense trading activity triggered by the war in the Middle East and thanks to a flurry of investment banking transactions. Together with Wells Fargo, they collectively reported $27.53 billion in profits, up 17 per cent.
At JP Morgan, profits rose 13% to 16.5 billion, the second best result ever, with revenues up 10% to 49.84 billion (and managed revenues of 50.5 billion). Citi, which announced that it had nearly completed protracted restructuring and streamlining plans, posted a 42% surge in profits to $5.79 billion and revenues, up 14% to $24.63 billion, were the highest in at least a decade. Goldman Sachs had already opened the reporting season by reporting rosy results.
But the high finance showdown remained tinged with doubt. The chief executive of JP Morgan, Jamie Dimon, a long-time statesman of American high finance, added a new alarm to the performance. While the US economy today seems to be holding up under the strain, "a complex framework of risks" is worsening and has the power to shatter optimism. A picture that includes shocks in energy prices and geopolitical unknowns, multiplied by the conflict triggered by Donald Trump in Iran. There is no shortage of more traditional clouds either, from rising US debt and deficits to speculative bubbles. What's more, Dimon describes the dangers as 'significant', urging people to be prepared for them, although he indicates that it is difficult to predict when and how they will materialise. His alarm echoed the spectres of global crisis raised yesterday by the International Monetary Fund at its spring meeting in Washington, should the Middle East conflict drag on.
In a still-golden quarter, however, JP Morgan enjoyed record performance in the corporate division: investment banking fees rose 28 per cent and M&A advisory revenues jumped 82 per cent. The markets division, in trading, collected unprecedented revenues of 11.6 billion, up 20 per cent, with fixed income up 21 per cent and equity up 17 per cent.
Consumer activities contributed in turn, with 13% increases in income from credit cards and auto loans, which, for Chief Financial Officer Jeremy Barnum, shows general economic 'resilience'. However, worrying symptoms are also emerging in retail services: Americans' card debt is rising, deposits are languishing, and credit to small businesses is down 10 per cent.
