JPMorgan Profit Soars After Bank Releases Reserves for Bad Loans -- Update
April 14 2021 - 07:46AM
Dow Jones News
By Orla McCaffrey
JPMorgan Chase & Co. said Wednesday that first-quarter
profit nearly quintupled, after the bank released $5.2 billion it
had set aside to cover soured loans.
The bank posted a profit of $14.3 billion, or $4.50 per share,
well above the $3.10 per share forecast by analysts polled by
FactSet. A year earlier, JPMorgan reported a quarterly profit of
$2.87 billion, or $0.78 a share.
At that time, the coronavirus pandemic was just taking hold in
the U.S., and JPMorgan and other big banks set aside billions of
dollars to prepare for a potential flood of bad loans. In the first
quarter, the reserve release gave earnings a meaningful boost. The
bank released $2.9 billion in the fourth quarter.
The nation's largest bank also reported revenue of $32.27
billion, up 14% from a year earlier. Revenue beat the $30.5 billion
predicted by analysts.
The rainy-day funds ate into quarterly profits for much of 2020,
when banks were concerned that struggling businesses and consumers
would start to miss loan payments. But many of those losses never
materialized, and now banks are poised to cash in on their
diligence.
The U.S. economy's rebound has surpassed banks' internal
forecasts, convincing large financial institutions including
JPMorgan to begin removing some of the safeguards erected during
2020 to prevent major losses. Banks believe the trillions of
dollars in government stimulus coursing through the economy,
coupled with accelerating vaccine distribution, have insulated
consumers and businesses from the pandemic's worst-case financial
scenarios.
JPMorgan Chief Executive James Dimon believes the economy is
primed for a "Goldilocks moment" of fast growth and inflation and
interest rates that move slowly upward, he said in his annual
letter to shareholders last week.
The bank's stock price reflects that shift. Shares of JPMorgan
have risen more than 21% since the beginning of the year. The KBW
Nasdaq Bank Index, which tracks shares of the largest lenders, is
up close to 25% this year, compared with 10% for the S&P
500.
Write to Orla McCaffrey at orla.mccaffrey@wsj.com
(END) Dow Jones Newswires
April 14, 2021 07:31 ET (11:31 GMT)
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