JPMorgan Profit Soars After Bank Releases Reserves for Bad Loans -- Update

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.

The rainy-day funds ate into quarterly profits for much of 2020, when banks were concerned that struggling businesses and consumers would start to miss loan payments. But many of those losses never materialized, and now banks are poised to cash in on their diligence.

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.

JPMorgan Chief Executive James Dimon believes the economy is primed for a "Goldilocks moment" of fast growth and inflation and interest rates that move slowly upward, he 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.

Write to Orla McCaffrey at [e-mail]

(END) Dow Jones Newswires

April 14, 2021 07:31 ET (11:31 GMT)

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