JPMorgan Chase reported record first-quarter profit and revenue on Friday, with Citigroup, Wells Fargo, BlackRock and PNC Financial also posting strong results — the first major bank earnings since Silicon Valley Bank and Signature Bank collapsed last month. The reports were accompanied by warnings from executives and Federal Reserve officials that interest rates could rise further, lending conditions could tighten, and a mild recession remains possible.
Big banks post strong Q1 earnings as recession fears and rate concerns grow
JPMorgan Chase reported record first-quarter profit and revenue on Friday, with Citigroup, Wells Fargo, BlackRock and PNC Financial also posting strong results — the first major bank earnings since Silicon Valley Bank and Signature Bank collapsed last month. The reports were accompanied by warnings from executives and Federal Reserve officials that interest rates could rise further, lending conditions could tighten, and a mild recession remains possible.
JPMorgan Chase CEO Jamie Dimon said on the company's post-earnings conference call that investors should prepare for interest rates to remain higher for longer than anticipated. 'People need to be prepared. They shouldn't pray that they don't go up. They should prepare for them going up. And if it doesn't happen, serendipity,' Dimon said. He described the banking situation as 'distinct from 2008 as it has involved far fewer financial players and fewer issues that need to be resolved,' but cautioned that 'financial conditions will likely tighten as lenders become more conservative.'
Dimon said he does not expect a full credit crunch from the recent banking turmoil, predicting 'a little bit of tightening' mostly contained to the real estate market, but said tighter financing conditions increase the odds of a recession. 'It's not like a credit crunch,' he said. JPMorgan Chase also stated Friday that its exposure to the office sector is limited.
Federal Reserve Bank of Chicago President Austan Goolsbee said Friday that a mild recession is 'definitely on the table as a possibility,' citing declining retail sales, slowing construction, and the cumulative effect of nine interest rate increases in just over a year. He told CNBC that despite those concerns, the labor market 'continues to be very strong.' Goolsbee also said recent declines in consumer and producer prices and retail sales suggest Fed tightening is working to bring down inflation, but said he intends to spend the next three weeks assessing how much credit tightening is coming from the banking crisis.
Federal Reserve Governor Christopher Waller said Friday the central bank needs to continue tightening monetary policy. Following the bank earnings releases and those comments, analysts increased their expectations for quarter-point rate hikes at the Fed's May and June meetings.
Retail sales data for the period came in weaker than expected, and the University of Michigan's preliminary April consumer sentiment survey showed little impact from the banking crisis on consumers' attitudes, though recession concerns persisted. Joanne Hsu, director of the university's surveys of consumers, said year-ahead inflation expectations rose a full percentage point — from 3.6% in March to 4.6% in April — driven partly by higher gas prices. 'Consumers are expecting a downturn, they're not feeling as dismal as they were last summer, but they're waiting for the other shoe to drop,' Hsu said.
BlackRock reported first-quarter revenue down 10% from a year ago and cut CEO Larry Fink's pay by 30% to $25.2 million for 2022, according to a filing with the Securities and Exchange Commission. Fink's total compensation included a base salary of $1.5 million and $23.7 million in total incentive awards. President Rob Kapito's compensation was reduced by 34% to $18.95 million. The firm said management concentrated downward pay adjustments toward senior staff to limit the impact on broader employees.
The Federal Reserve said Friday that UBS's purchase of Credit Suisse's US subsidiaries can move forward, approximately one month after UBS agreed to acquire the Swiss lender for 3 billion Swiss francs, or $3.25 billion. The Fed said UBS will provide a quarterly updated plan for combining the two firms' US operations and must comply with enhanced prudential standards including liquidity requirements. Credit Suisse had received an emergency loan of nearly $54 billion from the Swiss National Bank before the UBS deal was reached. Its difficulties accelerated after its largest backer, the Saudi National Bank, said it would not provide additional capital following a nearly 10% stake purchase for $1.5 billion in 2022.
US stock indices fell on Friday but recorded weekly gains. The Dow Jones Industrial Average slipped 144 points, or 0.4%, on the day but rose 400 points, or 1.2%, for the week. The S&P 500 fell 0.2% on Friday but gained 0.8% for the week. The Nasdaq Composite dropped 0.4% on Friday and advanced 0.3% for the week.
Outgoing World Bank President David Malpass, speaking at the IMF-World Bank spring conference, acknowledged that GDP data from Russia is difficult to verify, saying 'the quality of the data differs substantially by country' and that 'there's not very much in terms of double checking of data.' He said GDP figures were not capturing the 'reality' and 'horror' of the war in Ukraine, and that 'life is hard in Russia.' The IMF projected in January that Russia's economy would expand by 0.3% in 2023 and 2.1% in 2024. The World Bank forecast a contraction of 3.3% this year, while the OECD projected a 5.6% contraction.
- The source does not state the specific first-quarter revenue or net income figures for Citigroup, Wells Fargo, or PNC Financial.
- The source does not state what positions Citigroup or PNC Financial took on the banking crisis, noting only that they did not address it in their earnings releases.
- The source does not state the final University of Michigan consumer sentiment index reading for April, only that it 'held steady' based on a preliminary result.
- The source does not state the exact magnitude of the retail sales decline beyond describing it as greater than expected.
- The source does not state whether regulators other than the Federal Reserve must approve the UBS acquisition of Credit Suisse's US subsidiaries before it can be completed.
- The source does not state the total value of assets regulators hired BlackRock to help sell beyond the $114 billion figure attributed to the collapse context.
- The source text supplied appears truncated; some material may be missing.