JPMorgan Chase Q1 net profit increased by 9% year-on-year, Dimon warns: The U.S. economy is "quite turbulent" | Earnings Report Insights

JPMorgan Chase's Q1 revenue and net profit both exceeded market expectations, with stock trading income soaring 48% to a record high. Despite the impressive performance, JPMorgan CEO Jamie Dimon issued a stern warning about the U.S. economy.

In the earnings report statement, Dimon stated that the U.S. economy faces a "considerably turbulent" situation, and "we continue to believe that maintaining excess capital and ample liquidity in the current environment is a prudent move." JPMorgan has increased its provisions for future loan losses by 75% compared to the same period last year, indicating that the largest U.S. investment bank expects borrowers to face more difficulties.

On April 11, before the U.S. stock market opened, JPMorgan released its Q1 financial report. Here are the key points:

• Revenue Situation: Q1 managed revenue reached $46 billion, better than the market expectation of $44.39 billion, a year-on-year increase of 8%. Among them, net interest income was $23.4 billion, a slight year-on-year increase of 1%, while non-interest income surged 17% to $22.6 billion.
• Profitability: Q1 net profit was $14.6 billion, exceeding analyst expectations of $13.6 billion, a year-on-year increase of 9%; earnings per share reached $5.07, a year-on-year increase of 14%.
• Business Highlights: Stock trading income surged 48%, reaching a record high; investment banking fees increased by 12% year-on-year; net inflows in asset management reached $90 billion; credit card income grew by 12%.
• Capital Situation: CET1 ratio reached 15.4%, well above regulatory requirements; held cash and liquid securities totaled $1.5 trillion; book value per share was $119.24, a year-on-year increase of 12%;
• Shareholder Returns: Q1 return on equity (ROE) was 18%, tangible common equity return (ROTCE) remained at 21%, $7.1 billion in stock repurchases in Q1, and announced a 12% increase in dividends.
• Asset Management Scale: Managed assets reached $4.1 trillion (a year-on-year increase of 15%), with net inflows of $90 billion.
• Credit Situation: Credit costs were $3.3 billion, net charge-offs increased to $2.3 billion, and reserves increased by $973 million. Loans totaled $1.36 trillion, estimated at $1.35 trillion, total deposits were $2.50 trillion, with a remaining $2.42 trillion.
• Performance Outlook: Maintained the expectation of approximately $95 billion in annual expenses, with estimated net interest income for the fiscal year at approximately $94.5 billion, slightly higher than the previous estimate of $94 billion.

JPMorgan's stock rose nearly 3% in pre-market trading, despite a cumulative decline of over 5% this year.

Significant Growth in Trading Business, with Stock Trading Performance Standing Out

In Q1, the most notable business segment for JPMorgan was the market trading business: revenue reached $9.7 billion, a year-on-year increase of 21% Among them, stock trading revenue surged 48% to $3.8 billion, setting a record high and far exceeding analysts' expectations.

Fixed income trading revenue increased by 8% to $5.8 billion. Investment banking fees rose 12% year-on-year to $2.2 billion, a growth rate lower than JPMorgan's mid-February forecast of mid-single-digit growth, as the market volatility that also drove trading business has cooled down mergers and new stock listings.

Dimon stated that investment banking clients "have become more cautious in the face of increased market volatility."

Retail Business Shows Signs of Pressure

The Consumer and Community Banking (CCB) segment performed relatively weakly, with a net profit of $4.425 billion in the first quarter, down 8% year-on-year.

Notably, the net charge-off rate for credit cards rose to 3.58%, a result of the gradual maturation of recently issued credit limits, which may indicate cracks in consumers' financial health.

Banking and wealth management revenue fell 1% year-on-year, primarily affected by a decline in deposit balances and interest income, although this decline was partially offset by an increase in asset management fees from the wealth management business. The increase in credit loss reserves for consumer credit is also noteworthy, reflecting the bank's cautious attitude towards the future economic environment.

Asset Management Business Maintains Strong Growth Momentum

The Asset and Wealth Management (AWM) segment continued to perform strongly, with a net profit growth of 23% year-on-year to $1.583 billion in the first quarter.

This growth was mainly driven by an increase in management fees, reflecting strong net inflows and high market levels. Assets under management reached $4.1 trillion, a 15% year-on-year increase, while total client assets reached $6.0 trillion, also growing by 15%.

Prudent Capital Management: Loan Loss Reserves Increased by $3.3 Billion, Up 75% Year-on-Year

JPMorgan continues to maintain a cautious approach to capital management.

In the first quarter, credit costs amounted to $3.3 billion, with net charge-offs of $2.3 billion, an increase of $376 million compared to the same period last year, primarily from credit card business; reserves increased by $973 million, mainly reflecting changes in the weighted average macroeconomic outlook.

However, the bank still maintains a sufficient capital buffer, with a CET1 capital ratio of 15.4%, well above regulatory requirements, and holds $1.5 trillion in cash and liquid securities.

The bank's quarterly charge-off rate—marked as the portion of loans deemed uncollectible—was $2.3 billion, up 19% year-on-year. Credit quality has deteriorated following the record low loan loss phase caused by government stimulus programs during the COVID-19 pandemic.

Notably, JPMorgan set aside $3.3 billion in reserves for potential loan losses, a 75% increase from the same period last year.

JPMorgan also increased its credit loss reserves by $973 million, including $549 million for wholesale business and $441 million for consumer business, indicating that JPMorgan is preparing for a possible economic downturn.

Dimon Warns: U.S. Economy "Quite Turbulent"

JPMorgan CEO Jamie Dimon expressed a cautious outlook on the economic prospects in the earnings report. He pointed out:

The economy is facing considerable turmoil (including geopolitical factors), with potential positive factors such as tax reform and deregulation, as well as potential negative factors including tariffs and the "trade war," persistent sticky inflation, high fiscal deficits, and still relatively high asset prices and volatility.

It is noteworthy that Jamie Dimon emphasized the importance of banks maintaining a "fortress balance sheet" in a turbulent environment:

"We believe that maintaining excess capital and sufficient liquidity in the current environment is a prudent approach." This statement indicates that despite strong market performance, JPMorgan Chase is still preparing for potential economic uncertainties.

In the annual letter to shareholders released on Monday, Dimon stated that tariffs could drive up inflation and slow growth, but whether it will trigger a recession remains uncertain. In an interview with FOX Business on Wednesday morning (just before Trump announced a 90-day suspension), Dimon expressed that he believes a recession is likely, and last week JPMorgan economists raised the probability of a global recession to 60%. https://wallstreetcn.com/articles/3744631

Meanwhile, other Wall Street CEOs also mentioned the ongoing turmoil related to Trump's trade war on Friday.

BlackRock CEO Larry Fink stated in a statement:

The uncertainty and anxiety about the future of the market and economy are dominating client conversations. We have seen similar periods before when there were significant structural shifts in policy and markets—such as the financial crisis, the COVID-19 pandemic, and the soaring inflation in 2022.

Robin Vince, President and CEO of BNY Mellon, stated:

Looking ahead, we are prepared to navigate a wide range of macroeconomic and market scenarios as the outlook for the operating environment becomes increasingly uncertain