The increase in Q2 2023 figures show that JPMorgan is not negatively affected by its recent acquisition of First Republic Bank.
American multinational financial services giant JPMorgan Chase (NYSE: JPM) has reported Q2 figures for 2023, exceeding expectations set by analysts. Much of the company’s rise came from increasing interest income and interest rates.
JPMorgan reported a total revenue of $42.4 billion for Q2 2023, higher than the $38.96 billion Refinitiv estimated. The company also reported adjusted earnings per share at $4.37 versus the estimated $4.
JPMorgan had a good quarter as its net income came in at $14.5 billion, a 67% increase, or a 40% spike excluding the First Republic acquisition. In premarket trading, JPM is changing hands at $153.56, 3.24% higher than its previous $148.87 close. The company’s stock has also risen nearly 4% in 1 month, more than 7.3% in three months, and 11% year-to-date (YTD). In addition, JPM has climbed nearly 32% in the past year.
JPMorgan’s rise comes following a lot of pressure on the banking sector. Since last month, regional banks have reported reduced interest revenue, with more expected in the near future. Consequently, lenders are reportedly preparing to make more provisions as the economy staggers. Estimates suggest JPMorgan will post $2.72 to provide for credit losses.
Q2 Increase in 2023 Follows Increased JPMorgan Revenue Target
After successfully acquiring First Republic Bank early in May, JPMorgan raised its key target revenue for 2023 to $84 billion. During an investor presentation, the bank increased the target from $3 billion after reporting impressive figures for Q1 2023. Profit then jumped 52% in Q1, with revenue increasing 25% year-over-year (YoY).
JPMorgan officially acquired First Republic Bank, including all deposits and a large number of shares. The deal involved JPMorgan taking up nearly $30 billion in securities and $173 billion in loans, all belonging to First Republic. Following the acquisition, JPMorgan fired nearly 1,000 First Republic staff and offered employment to about 7,000 workers for full-time or temporary roles. However, the temporary roles may only last between three months and one year. First Republic staff not offered any roles were to receive benefits for 60 days, lump sum payments, and benefits coverage.
JPMorgan Predicts ‘Hard Landing’ for UK Economy
JPMorgan economist Allan Monks has warned about an economic downturn in the UK owing to the continuous increase in interest rates. Monks believes that the Bank of England (BoE) could peak interest rates at 5.75% or continue the increase up to 7% “under some scenarios”.
According to Monks, there are many reasons the BoE could maintain its increase in interest rates. Monks said high inflation could cause “a sustained wage-price spiral”, spurring continued rate hikes. The analyst also believes that an increase in short-term expectations for arresting inflation could still end in raised hikes even if longer-term measures remain stable. Monks cautions that these events could force the central bank to raise rates higher than JPMorgan’s forecast.
Comments made by BoE Governor Andre Bailey admit that the rising inflation and interest rates used to tackle the rise are factors negatively affecting the people. However, Bailey assured that the BoE’s priority is reducing inflation.