JPM JP Morgan Chase and Co

By Orla McCaffrey 

JPMorgan Chase & Co. posted a nearly fivefold increase in quarterly profit thanks to booming markets and an economic recovery that allowed it to free up $5.2 billion in funds it had set aside to cover soured loans.

The nation's largest bank reported a record quarterly 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. The bank reported revenue of $32.27 billion, up 14% from a year earlier.

After the coronavirus pandemic took hold in the U.S. early last year, JPMorgan and other big banks set aside billions of dollars in loan-loss reserves to prepare for a potential flood of consumer and business defaults. The rainy-day funds ate into quarterly profits for much of 2020. But big losses never materialized, and now banks are now cashing in on their diligence.

Wall Street also powered JPMorgan's first-quarter results. Corporate and investment bank profit nearly tripled to $5.74 billion, a quarterly record, and revenue rose 46% to $14.6 billion. Trading revenue rose 25% from a year ago, and investment-banking fees rose 57%.

The U.S. economy's rebound has surpassed banks' internal forecasts. Banks believe the trillions of dollars in government stimulus coursing through the economy, coupled with accelerating vaccine distribution, has insulated consumers and businesses from the pandemic's worst-case financial scenarios.

"The year has gotten off to a strong start and a robust economic recovery is under way," Chief Financial Officer Jennifer Piepszak said on a call with reporters Wednesday morning. "Of course, there are still risks and uncertainties that lie ahead that we're preparing for as well as specific issues that we're facing."

In his annual letter to shareholders last week, Chief Executive Jamie Dimon said he believes the economy is primed for a "Goldilocks moment" of fast growth and inflation and interest rates that move slowly upward.

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.

The forces that pushed JPMorgan's Wall Street operation to its best fourth quarter on record last year continued into the early months of 2021. Record investments in blank-check firms helped boost equity-underwriting fees. Trillions of dollars in government stimulus flowed into Americans' checking accounts, and some of it ended up in the stock market.

The bank made a record $3 billion in investment-banking fees in the first three months of the year. It expects the strengthening economy, a busy slate of public offerings and high CEO confidence to provide a steady pipeline of investment-banking deals, Chief Operating Officer Daniel Pinto said in a memo to employees Wednesday.

Revenue fell 6% in JPMorgan's sprawling consumer business. In asset and wealth management, revenue rose 20%.

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 10:33 ET (14:33 GMT)

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