The biggest bank in the US, JPMorgan, is scheduled to announce its first-quarter financial results today. Following the failure of two regional lenders last month, analysts are carefully observing the bank’s operations in an effort to gather information on how the banking sector fared. A bank run triggered by the collapse resulted in a surge in deposits at JPMorgan and other big banks. However, when clients move their money into higher-yielding products like money market funds, banks have forced to charge more for these deposits. Despite the Federal Reserve’s attempts to control inflation, this tendency is expected to limit the benefits that banks get from higher interest rates.
Analysts and investors are most concerned about the flow of deposits through American financial institutions this quarter. Customers’ need for the perceived safety of megabanks like JPMorgan and Bank of America put pressure on smaller banks last month. Customers are realizing they can earn greater returns outside of checking and savings accounts, which is causing deposits to leave the regulated banking system overall.
Analysts also want to know whether JPMorgan and other banks are tightening lending rules in preparation for the anticipated US recession, which might limit this year’s economic growth by making it more difficult for individuals and companies to get loans. As a consequence of the anticipation of a weakening economy later this year, which might have an adverse effect on results, banks have already started putting aside additional loan loss provisions. JPMorgan is anticipated to report a $2.27 billion provision for credit losses, according the StreetAccount estimate.
Due to the still-closed IPO market, investment banking fees are also projected to be low this quarter. JPMorgan’s CFO, Jeremy Barnum, said in February that trading was trending “a little bit worse” and that investment banking income was on track to drop by 20% from a year earlier.
Analysts will be interested in hearing what Jamie Dimon, CEO of JPMorgan, has to say about the economy and his predictions for how the local banking issue will unfold. JPMorgan led attempts to pump First Republic with $30 billion in deposits, which helped stabilize the client bank after it teetered last month.
JPMorgan’s stock has dropped just 4% this year, surpassing the KBW Bank Index’s 31% loss. Today will also see the announcement of the financial results from Wells Fargo and Citigroup, while those from Goldman Sachs, Bank of America, and Morgan Stanley will be made public on Tuesday and Wednesday, respectively.
