Profits at big US banks show few signs of industry distress

NEW YORK >> The nation's largest banks appear to be weathering the current turmoil in their industry just fine.

Despite a pair of historical failures last month that put the nation's banking industry into crisis mode, the nation's biggest banks posted strong profits last quarter, helped by higher interest rates and a U.S. economy that keeps growing and adding jobs even as the Federal Reserve attempts to curb inflation.

JPMorgan Chase & Co. posted a 52% jump in its first-quarter profits. The bank saw deposits grow noticeably, as businesses and customers flocked to the banking titan after the failure of Silicon Valley Bank and Signature Bank last month. Wells Fargo said that it earned $5 billion, or $1.23 per share, in the three months ended March 31, beating analyst projections by 10 cents a share. Revenue also topped Wall Street's forecast.

Meanwhile Citigroup also beat analysts' estimates on revenue, although its bottom line was impacted by one-time losses on some investments.

“These were the most watched bank earnings announcements in over a decade, with market participants scouring the results looking for signs of cracks in the US banking sector. Those analysts looking for signs of the banking crisis were greatly relieved to not find any,” said Octavio Marenzi, CEO of the consulting firm Opimas LLC, in an email.

“What crisis?,” analysts at UBS titled a report after JPMorgan, Wells and PNC Financial reported their results.

Investors have been deeply concerned about the banks going into this earnings season after the collapse of Silicon Valley Bank and Signature Bank. While banks have benefitted from being able to charge customers more for loans in a higher interest rate environment, banks have also accumulated billions of dollars in paper losses on bonds and other securities bought when interest rates were lower.

The biggest banks have been the least of investors' worries because the size of their massive balance sheets and diversity of their businesses — business loans, credit cards, trading, investment banking, etc. — allow them to hold a variety of securities. But more notably, the largest banks have long carried an implicit government backstop as being “too big to fail” since the 2008 financial crisis.

This backstop has attracted billions of deposits to the largest banks since Silicon Valley Bank's collapse. JPMorgan grew deposits by $37 billion during the quarter, up to $2.4 trillion. Deposits at big banks had been falling for several quarters as consumers spent down their pandemic savings and businesses tapped into their stored cash to pay bills. But following the collapse of Silicon Valley Bank and Signature Bank in March, some businesses withdrew their funds from smaller banks and moved them into the larger banks.