Large U.S. banks filled their coffers even thicker by sucking up capital that broke away from small and medium-sized banks last month. JP Morgan Chase & Co., the largest U.S. bank by asset size, recorded an "earnings surprise" in the first quarter. When the market was concerned about an economic recession in the face of high prices and high-interest rates, large banks such as JP Morgan increased their assets by increasing customer deposits.
1. JPMorgan Chase [JPM]
JP Morgan closed at USD 138.73, up 7.55% (USD 9.74) on the New York Stock Exchange, which closed on the 15th (Korea Standard Time). JP Morgan, a "good bank stock" valued at $406.68 billion in market capitalization based on the U.S. stock market information site Companies Market Cap, recorded an unusually large increase. It is because it announced its first-quarter earnings that exceeded Wall Street forecasts.
JPMorgan Reports Q1 Earnings Ahead Of New York Stock Exchange Opening. Revenue was $39.34 billion and adjusted EPS was $4.32. According to a Wall Street analyst estimate compiled by U.S. financial information company Refinitiv, sales were $36.19 billion and EPS was $3.41. All earnings beat forecasts.
What is noteworthy about JP Morgan's performance is the number of deposits held. Deposit holdings in the first quarter amounted to $2.38 trillion. It fell 7% from a year ago when the U.S. Federal Reserve began raising interest rates but increased 2% compared to the previous fourth quarter of last year. It also exceeded the $2.31 trillion forecast for Street Account, a market information company under FactSet, a U.S. financial information company.
U.S. economic channel CNBC explained, "Wall Street analysts have expected that funds from Silicon Valley Bank (SVB) and Signature Bank will flow into JP Morgan." Jeremy Barnum, Chief Financial Officer (CFO) of JP Morgan, said, "A considerable amount of new accounts have been opened, and an influx of commercial bank deposits has been seen."
JP Morgan is the largest bank in the United States with $3.773 trillion in assets as of the end of September last year by the Federal Financial Institution Inspection Committee (FFIEC). Like SVB, JP Morgan increased its assets by attracting new deposits from small and medium-sized banks that went bankrupt last month due to bank runs (large-scale deposit withdrawals).
Jamie Dimon, CEO of JPMorgan, did not just look optimistic about the future. "The U.S. economy is on a sound footing," he said in announcing first-quarter results. Consumption is still taking place, the balance sheet is strong and the company is in good condition, he said. "However, the 'dark clouds' that we have witnessed over the past year remain." The turmoil in the banking sector added to the risk, he said, pessimistic.
Dimon has compared the U.S. economy to weather phenomena. At a financial meeting in New York on June 2 last year, ahead of the Fed's first "Giant Step" (0.75 percentage point rate hike), "I said there have been dark clouds." Now I'm going to change that. It became a hurricane. "No one knows whether it will be a small hurricane or a super hurricane like Sandy," he said.
2. Citigroup [C]
Major U.S. banks, including JP Morgan, announced their earnings on the same day and announced the start of the "earnings season" in the first quarter. The bank that received as much attention as JP Morgan is Citigroup, the holding company of Citibank, the third-largest in the U.S. Citigroup rose 4.78% ($2.26) to close at $49.56 on the New York Stock Exchange.
Citigroup also recorded good performance in the first quarter as a large financial company. Revenue was $21.45 billion and net profit was $4.6 billion (EPS $2.19). Earnings exceeded Refinitiv's forecast of $19.99 billion in sales and $4.3 billion in net profit.
"Our balance sheet is strong and well-managed," Citigroup CEO Jane Fraser said in a statement. "A strategy that innovates and simplifies the company and focuses on core businesses is making progress," he said.
3. Boeing [BA]
U.S. aircraft manufacturer Boeing fell 5.56% ($11.88) to close at $201.71 on the New York Stock Exchange. Boeing said, "We will temporarily suspend delivery of 737 Max aircraft due to parts problems from suppliers."
Boeing explained that it received a notification from the supplier that "a non-standard manufacturing process was used for two rear parts of the 737 Max passenger plane." The Boeing 737 Max crashed in Indonesia in October 2018 and Ethiopia in March 2019, and was once banned.
It appears that the first quarter of 2023 has been a mixed bag for some of the major players in the U.S. financial and aviation sectors. JP Morgan and Citigroup have reported positive earnings driven by an increase in customer deposits, while Boeing has faced a setback with the temporary suspension of 737 Max aircraft deliveries due to parts problems from suppliers. While there is optimism about the U.S. economy, concerns remain about potential risks and uncertainties in the banking sector. Overall, it will be important to closely monitor these developments and their potential impacts in the coming months.
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