JPMorgan rises above rivals with record annual profit of $49 billion

Last year JPMorgan Chase (JPM) earned more profits than it ever has before, even as its results dipped in the final quarter.

The largest lender in the US reported Friday that it raked in a record $49.6 billion in annual net income, the most ever in the history of the American banking industry. And it happened during a year that was the scariest for the industry since the financial crisis of 2008.

That result — buoyed by better loan margins and the acquisition of failed regional lender First Republic — was 31% better than its bottom line in 2022.

It blew away all rivals. JPMorgan’s annual net income surpassed Bank of America (BAC) by $23 billion, Wells Fargo (WFC) by $30 billion and Citigroup (C) by $40 billion.

JPMorgan also predicted that a key internal measure showing the difference between what it earns on loans and pays out on deposits would stay roughly flat at $88 billion in 2024 — and that's even if the Federal Reserve cuts interest rates six times this year.

Higher rates helped turbocharge its lending income for much of the last year.

"We remain confident in our ability to continue to deliver very healthy returns," CEO Jamie Dimon said in a release, while also noting that government spending "may lead inflation to be stickier and rates to be higher than markets expect."

"While we hope for the best, the past year demonstrated why we must be prepared for any environment."

JPMorgan’s stock, which recently touched an all-time high, was up more than 2% in morning trading before closing slightly down for the day. The stocks of Bank of America and Wells Fargo also were down Friday.

Citigroup, the only big bank to report a net loss in the fourth quarter, watched its stock rise more than 1% after disclosing that it would be reducing headcount by 20,000 by 2026 as part of a cost-cutting push that will save it an estimated $2.5 billion.

But what was also evident Friday is that even JPMorgan is not immune from a challenging period for the banking industry. Three sizable regional banks failed last year, triggering a panic that tested numerous institutions at a time of elevated interest rates.

JPMorgan was among the banks that paid a price for that turmoil in the fourth quarter. Its quarterly profits of $9.3 billion dipped 15% from a year earlier largely because it took a one-time hit of roughly $3 billion to pay for a special assessment charged by the Federal Deposit Insurance Corporation.

Other big banks were also weighed down by similar FDIC assessments, which were used to cover the $18 billion in losses to the FDIC’s insurance fund from the failures of Silicon Valley Bank and Signature Bank last March.

At Citigroup, an FDIC assessment of $1.7 billion and other charges and reserves it previously disclosed resulted in a net loss of $1.8 billion in the fourth quarter. The bank is in the middle of a massive reorganization that includes job cuts and management shuffles.

CEO Jane Fraser called the results "very disappointing" but said "we made substantial progress simplifying Citi and executing our strategy in 2023." This year, she added, would be a "turning point."

At Bank of America, fourth quarter profits fell roughly 56% from a year ago due to its FDIC assessment of $2.1 billion and other charges related to year-end ESG financing and the reconfiguration of one of its benchmark lending rates.

Unrealized losses in its held-to-maturity securities portfolio — a concern of investors for much of 2023 — dropped 25% as bond markets staged a comeback in the final quarter of 2023.

Wells Fargo’s quarterly profits were up 9%, but that was largely because the year-ago period had billions in operating losses from legal and regulatory costs. Its FDIC assessment was $1.9 billion.

Wells warned that its net interest income — the difference between what it earns on loans and pays for deposits — might be 7-9% lower in 2024 as the Fed is expected to reduce interest rates.

Lower rates offer a mixed picture for the biggest banks in the US. While lower rates will help reduce deposits costs and could boost demand for new borrowings, they also mean that banks may not be able to charge as much interest on new loans.

Even JPMorgan warned Friday that its lending income would likely go down each quarter during 2024.

"It shouldn't be surprising that our outlook has us beginning to march down the path of normalizing our returns," JPMorgan CFO Jeremy Barnum said, citing “meaningful sequential quarterly declines" in lending income throughout 2024.

David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.

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