JPMorgan’s Profit Jumps, but Interest Rates Remain a Threat

The News

JPMorgan Chase, the largest lender in the United States, made $14.5 billion in profit last quarter, a big jump from the same period last year, it reported on Friday. The bank was helped by growth virtually across the board, including increases in lending, credit-card transactions, as well as relative stability in investment banking. JPMorgan’s stock was up 3 percent in premarket trading.

It was another quarter of banner financial results, and a reminder that in banking, the rich tend to get richer.

Why It Matters

Given its size, JPMorgan is a proxy for the banking industry at large. Jamie Dimon, the bank’s chief executive, has deep political connections and his prognostications on the economy are scrutinized in some circles as closely as a central banker’s musings.

On Friday, in a statement, Mr. Dimon said the U.S. economy was “resilient,” echoing language he has used repeatedly this year, but listed a litany of risks, including that consumers are burning through their cash buffers and that inflation remains high.

And there were two interesting side-notes in the bank’s latest results: Its total deposits dropped slightly, an indication that consumers are moving their cash elsewhere in an era when higher interest rates have made it easier to find higher-paying investments than in checking accounts. Separately, but also related to interest rates, last quarter JPMorgan lost $900 million on investments in U.S. Treasury bonds and mortgage-backed securities, which have dropped in value as rates rise — but that was barely a dent in its results.

Background

JPMorgan and Mr. Dimon have been all over the news this year, thanks to their prominent role as an attempted stabilizing force during the spring’s banking crisis that felled three smaller lenders. JPMorgan bought one of those failed banks, First Republic. In an indication of how troubled that institution had become, JPMorgan said Friday that it was setting aside $1.2 billion to deal with losses in First Republic’s lending portfolio.

Analysts still expect the acquisition to prove worthy in the end, thanks to First Republic’s base of wealthy clients and coastal branches, which Friday’s results show are already buoying JPMorgan’s asset and wealth management arms.

What’s Next

The next week or so will see a slew of other banks report their quarterly earnings. Among the most closely watched will be Wednesday’s results from Goldman Sachs, which has hinted publicly of a disappointing stretch, and regional banks like Western Alliance and Comerica, which will be looking to prove they have bounced back from their recent troubles.