JPM JP Morgan Chase and Co

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.

After the coronavirus pandemic took hold in the U.S. early last year, JPMorgan and other big banks set aside billions of dollars to prepare for a potential flood of bad loans.

The rainy-day funds ate into quarterly profits for much of 2020. But many of those losses never materialized, and now banks are poised to cash in on their diligence. The bank also released $2.9 billion in the fourth quarter.

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.

The economy is primed for a "Goldilocks moment" of fast growth with inflation that moves slowly upward along with interest rates, JPMorgan Chief Executive Jamie Dimon 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.

JPMorgan's corporate and investment bank, the division that serves Wall Street, helped power first-quarter results. Its profit nearly tripled to $5.74 billion, and revenue rose 46% to $14.6 billion. Trading revenue rose 25% from a year ago, and investment banking fees rose 57%

In asset and wealth management, revenue rose 20%. On the consumer side, revenue fell 6%.

Total loans fell about 4% from a year ago. Large U.S. lenders saw their loan books shrink in 2020 for the first time in more than a decade, but banking executives say they expect demand to pick up later this year as the economy continues to recover.

Still, banks have been squeezed over the past year by low interest rates, which crimp what they can make on lending. The difference between what JPMorgan earns on loans and pays for deposits fell to 1.69% in the first quarter, down from 2.37% a year ago.

Deposits surged another 6 percent from the previous quarter, to $2.28 trillion.

Write to Orla McCaffrey at orla.mccaffrey@wsj.com

(END) Dow Jones Newswires

April 14, 2021 08:12 ET (12:12 GMT)

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