Bloomberg Market Specialists Brian Rooney and Keith Gerstein contributed to this article. The original version appeared first on the Bloomberg Terminal.
Background
JPMorgan Chase & Co., the biggest US bank, reported $20.2 billion in net interest income (NII) in the fourth quarter of 2022, improving on the $17.6 billion in third-quarter NII. Other banks also posted strong results for NII, with Bank of America posting a 29% increase year-over-year.
JPMorgan’s fourth quarter NII results bested Bloomberg’s consensus estimate by 8.5%, representing a 48.5% increase year-over-year. Analysts are upbeat about JPMorgan’s earning potential in their lending business for 2023, forecasting $74.57 billion in NII for the fiscal year after it’s 2022 beat consensus estimates by 2.59%.
Despite this consensus and the recent release of encouraging economic figures, Chief Executive Officer Jamie Dimon remains concerned about the economy longer-term. “The US economy currently remains strong with consumers still spending excess cash and businesses healthy,” Dimon said. “However, we still do not know the ultimate effect of the headwinds coming.”
The issue
Higher Federal Reserve interest rates have helped U.S. banks earn more in NII, although the rise in borrowing costs is raising the risks of increased non-performing loans (NPLs).
Bob Michele, chief investment officer at J.P. Morgan Asset Management, says that the Fed could continue raising rates into the second half of 2023. “It is possible the Fed will not initially do enough because the labor market proved more resilient,” Michele said. “This is one thing that can unravel the market, and it’s my biggest concern.”
While inflation has been cooling in recent months, consumer prices remains elevated 6.5% year-over-year – more than triple the Fed’s 2% target.
Tracking
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