JPMorgan posts record profits for 2023 despite 15% drop in Q4

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By Dan Sears

JPMorgan Chase posted a record annual profit — nearly $50 billion — despite taking a $3 billion hit in the fourth quarter to replenish a government deposit insurance fund, the Wall Street giant said Friday.

The nation’s largest lender hauled in $49.6 billion last year to post an impressive 31% improvement from its bottom line in 2022, blowing past economists’ expectations.

Shares of the bank climbed 2.3% before the opening bell.

CEO Jamie Dimon reiterated his view that the economy remained resilient but warned that inflation could be more persistent than expected and rates could be higher for longer.

“It is important to note that the economy is being fueled by large amounts of government deficit spending and past stimulus,” Dimon said.

The bank attributed its best-ever year to “loan growth” from high-interest rates and its acquisition of First Republic Bank, one of three midsize lenders to fail within a span of two months, per its earnings report.

Profit for the fourth quarter was $9.31 billion, or $3.04 per share, for the three months ended Dec. 31, the bank said on Friday. That compares with $11.01 billion, or $3.57 per share, a year earlier. 

Its fourth-quarter profit, however, slipped to $9.31 billion, or $3.04 per share — a drop from $11.01 billion, or $3.57 per share, from a year earlier — because it had to cough up $2.9 billion in fees to cover $18 billion in losses to the Federal Deposit Insurance Corporation’s insurance fund from the failures of Silicon Valley Bank and Signature Bank.

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JPMorgan’s 2023 earnings posted Friday came in at $49.6 billion, the most ever in the history of American banking. The record-breaking sum was not impacted by the bank’s 15% decline in the fourth quarter. AFP via Getty Images
JPMorgan CEO Jamie Dimon said in the earnings report that “markets currently expect a soft landing,” though he said earlier this week: “I still think the chances of it not being a soft landing are higher than other people.” Lenin Nolly/NurPhoto/Shutterstock

The special assessment was approved by the FDIC’s board of directors last month. The federal institution said that it will collect the levy at an annual rate of 13.4 basis points to cover SVB and Signature Bank’s collapses.

SVB, the tech world’s preferred lender, suddenly collapsed in March after facing a cash crunch due to surging interest rates and a meltdown in the tech sector that led many customers to pare their deposits.

Just days later, regulators closed Manhattan-based Signature Bank — a key financial institution for the cryptocurrency industry — over a “similar systemic risk exception,” the FDIC said at the time, referencing SVB’s failure.

Dimon said that its latest earnings report “was a good example of…the value of being there for clients — as we always are — in both good and bad times,” which comes after a tumultuous year when inflation has remained stubbornly above the Federal Reserve’s 2% goal, borrowing costs were lifted to a 22-year high and mortgage rates topped 8%.

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Many big banks have been weighed down by the FDIC’s special assessment that it implemented to cover costs related to Silicon Valley Bank and Signature Bank’s collapses in March 2023. Anadolu Agency via Getty Images

Dimon also said in the earnings report that “markets currently expect a soft landing.”

The remarks contradict comments the 67-year-old bank boss said to Fox earlier this week when he said “I still think the chances of it not being a soft landing are higher than other people,” citing the government’s record-high debt of $34.01 trillion.

Other big banks were also weighed down by similar FDIC assessments, including Bank of America, which said income fell 56% to $3.14 billion in the fourth quarter — double the 28% drop analysts had anticipated.

It also cited its FDIC assessment for the decline, as well as other charges related to its environmental, social, and governance (ESG) financing, which includes $14.93 billion in ESG-themed corporate bonds.

Separately on Friday, Wells Fargo reported that its fourth-quarter profits were $20.48 billion, marking a 2% increase from the same period in 2022, which its CEO Charlie Scharf attributed to higher interest rates and “the strong economic environment.”

Despite beating Wall Street’s expectations, the San Francisco-based bank warned that net interest income for 2024 could come in significantly lower year over year.

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Citigroup posted a $1.8 billion fourth-quarter loss on Friday, which was attributed to CEO Jane Fraser’s corporate overhaul, which includes slashing management and potentially laying off thousands of workers. REUTERS

Wells Fargo said that in the fourth quarter of 2023, net interest income fell 5% from a year ago, to $12.78 billion. It added that the figure could come in 7% to 9% lower this year, from $52.4 billion in 2023.

Citigroup, meanwhile, posted a $1.8 billion fourth-quarter loss, also tied to 2023’s banking failures as well as CEO Jane Fraser’s corporate overhaul.

The overhaul is reportedly expected to be fully completed by the end of 2024’s first quarter, and include slimming down management and potentially laying off thousands of employees.

Goldman Sachs and Morgan Stanley are scheduled to report their earnings on Tuesday.

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