JPM JP Morgan Chase and Co

By David Benoit and Rachel Louise Ensign 

The country's largest bank, JPMorgan Chase & Co., said a bright economy and strong lending drove it to a record profit in the first quarter.

That gave its stock price a boost, and the wider stock market a lift as well. The S&P 500 climbed 0.7%.

JPMorgan executives said the U.S. consumer is in good shape, pointing to healthy credit-card spending and auto lending. Business clients, too, have signaled growing confidence in recent weeks, the executives said.

"Those underlying drivers continue to chug along nicely," Chief Financial Officer Marianne Lake said on a conference call with reporters Friday.

Yet the results from JPMorgan and other banks Friday suggest they may be enjoying a last push from a period of rising interest rates that has now stalled.

Three years of modest rate increases have allowed banks to charge borrowers more without significantly increasing what they pay depositors, driving profits to record levels. The Federal Reserve interrupted that streak in March when it kept rates steady and indicated it was unlikely to raise them at all this year. Some have suggested the Fed could cut rates if economic conditions worsen.

The shift sent bank stocks sliding in March and led analysts to lower estimates for bank profits in the first quarter and the coming two years.

JPMorgan exceeded analysts' expectations, reporting a profit of $9.18 billion, or $2.65 a share. Wells Fargo & Co. and PNC Financial Services Group Inc. also reported higher profits Friday.

The three banks all posted higher net interest income -- the amount it makes on lending minus what it pays on deposits -- from a year ago. But that growth essentially disappeared compared with the fourth quarter, a clue that the benefits of rising rates are waning.

Wells Fargo lowered its net interest income projections for 2019. JPMorgan left its guidance unchanged despite the year's strong start. The banks said they expect deposit costs to keep rising.

"It was a better-than-expected quarter for the banks, which was encouraging to see," said Carter Henderson, portfolio specialist and director of institutional development at Fort Pitt Capital Group. "But I think that's as good as it's going to get for these big banks this year because in the first quarter they were still getting that tailwind from the last Fed hike in December."

Investors are looking ahead to next week's batch of quarterly earnings results, which includes more results from big banks including Goldman Sachs Group Inc., Citigroup Inc., Bank of America Corp. and Morgan Stanley.

While banks' core lending businesses could suffer if rates stall, their home-lending businesses could get a boost. Rising mortgage rates had contributed to a slowdown in the housing market.

At Wells Fargo, the largest U.S. home lender, mortgage originations fell 23% in the first quarter from the year-ago period. They fell 18% at JPMorgan.

Wells Fargo Chief Financial Officer John Shrewsberry said the bank expects mortgage volume to rise in the second quarter, in part from refinancings.

Profit at JPMorgan's consumer bank was up 19%, to $3.96 billion. The bank's core consumer loan volume rose 3% and the margins it made jumped, with card spending driving the gains.

At the commercial bank, profit increased slightly to $1.05 billion compared with $1.03 billion the prior year.

The bank's total core loans rose 2% to $942.7 billion, and while the bank put aside more to handle potential bad loans, credit quality remained strong overall.

On the Wall Street side of the operation, profit dropped 18% to $3.25 billion. A quiet market pulled down trading revenue 17% to $5.47 billion, which had been expected. A 10% increase in investment banking revenue offset some of the pain.

The bank's asset and wealth management unit made $661 million compared with $770 million a year earlier.

Costs increased 2% to $16.4 billion. The bank has said it would continue putting money into technology and expansion, including its first branch openings in years. Return on equity, a key measure of profitability, was 16% in the first quarter, compared with 15% a year ago.

At Wells Fargo, the fourth-largest U.S. bank by assets, first-quarter profit rose 14% to $5.86 billion, helped by one-time gains. Revenue, however, declined across all of its businesses as it continues to deal with the aftershocks from its fake-account scandal.

Jessica Menton contributed to this article.

Write to David Benoit at david.benoit@wsj.com and Rachel Louise Ensign at rachel.ensign@wsj.com

(END) Dow Jones Newswires

April 12, 2019 16:50 ET (20:50 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.