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Big banks warn of uncertain year after mixed first-quarter financial performances
NEW YORK (AP) — Big banks warned of an “uncertain” year ahead following mixed financial results during the first quarter in an environment of persistently high inflation and geopolitical clashes in Europe, the Middle East and elsewhere.
JPMorgan reported a modest 6% increase in profits on Friday, while profits at Wells Fargo and Citigroup declined, although both beat Wall Street expectations.
“Many economic indicators remain favorable. However, looking ahead, we remain alert to a number of significant uncertain forces,” said JPMorgan CEO Jamie Dimon, citing the wars in Gaza and Ukraine, as well as other geopolitical pressures, high levels of government spending across the world and “persistent inflationary pressures”. .”
Dimon used language on Friday that was similar to what he told investors at its annual shareholder letter earlier this week. In this letter, Dimon warned that geopolitical events, including the war in Ukraine and the Israel-Hamas Waras well as US political polarization, could be creating an environment that “may well be creating risks that could eclipse anything since World War II.”
Dimon’s shareholder letter on Monday seemed prescient two days later when the U.S. released Hotter-than-expected inflation data for March, putting uncomfortably high consumer prices back at the top of the agenda for policymakers, especially President Joe Biden as he bids for a second term in the White House.
Speaking to reporters, Citigroup executives echoed Dimon’s comments. Mark Mason, Citi’s chief financial officer, said that while the bank still sees a soft economic landing – where inflation cools while keeping the economy growing – risks to the economy abound.
“The global economy appears to be resilient,” Mason said, but the bank remains concerned about inflation and what will happen as interest rates remain high for an extended period of time.
JPMorgan, the country’s largest bank, made a profit of $13.42 billion, or $4.44 per share, compared with a profit of $12.62 billion, or $4.10 per share , in the same period of the previous year. JPMorgan’s results were dragged down by a one-time $725 million charge resulting from an assessment by the Federal Deposit Insurance Corporation.
Although they beat analysts’ expectations, JPMorgan shares fell more than 5% on Friday after the bank released conservative full-year projections for net interest income. That forecast largely reflects the bank’s expectation that the Federal Reserve will cut interest rates later this year.
Most of JPMorgan’s business metrics were solid in the quarter. Although investment banking revenues remained broadly stable, the bank reported an increase in activity. At its consumer bank, profits rose 6% and the bank set aside less money to cover potentially defaulted loans.
Wells Fargo released its first earnings report since the Biden administration eased some of the restrictions at the bank after a series of scandals.
Wells earned $4.6 billion in the first quarter, or $1.20 per share, beating analyst estimates of $1.06 per share. However, the profit was less than the $5 billion, or $1.23 per share, that Wells made in the same period last year.
The San Francisco-based bank said average loans were down from the first quarter of last year, but that drop was expected due to high interest rates.
In February, the Office of the Comptroller of the Currency, one of the regulators of large national banks like Wells Fargo, rescinded a consent order that had been in place since September 2016. The order — which came after Wells employees were discovered opened millions of accounts illegally to meet unrealistic sales targets – required the bank to overhaul how it sold financial products to customers and provide additional consumer protections as well as employee protections for whistleblowers.
Citigroup’s profits fell 27% from a year ago as the bank continues to restructure after selling much of its international franchises and slims down in the wake of the pandemic.
Citi earned $3.37 billion, or $1.58 per share, compared with a profit of $4.6 billion, or $2.19 per share, a year earlier.
Wells shares rose slightly on Friday, while Citigroup shares fell more than 2%.
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AP Business Writer Matthew Ott contributed to this report from Washington.