JPMorgan profit shrinks as it sets aside $3 billion for deposit insurance fund

JPMorgan Chase reported its best ever annual profit and forecast higher-than-expected interest income for 2024 even as its quarterly profit fell after it took a nearly $3 billion charge to replenish a government deposit insurance fund.

The largest US lender has benefited from its acquisition of failed First Republic Bank in May that brought in billions of dollars of loans and bolstered its net interest income (NII) - the difference between what banks make on loans and pay out on deposits.

The bank said it expects full-year net interest income (NII) of $90 billion. That was higher than estimates of $86.2 billion, according to LSEG data. In the quarter, NII rose 19 per cent to a record of $24.2 billion.

Shares of the bank climbed 2.3 per cent before the opening bell.

CEO Jamie Dimon reiterated his view that the US economy remained resilient, but warned that inflation could be more persistent than expected and rates could be higher for longer.

"The US economy continues to be resilient, with consumers still spending, and markets currently expect a soft landing. It is important to note that the economy is being fueled by large amounts of government deficit spending and past stimulus," Dimon said.

The pipeline for its investment banking unit is "robust" due to a more dovish interest rate environment, Chief Financial Officer Jeremy Barnum said, but warned of persisting uncertainty "around exactly how the pipeline materializes."

In the quarter, investment banking fees climbed 13 per cent, helped by strong equity and debt underwriting fees. Fixed income markets revenue also rose 8 per cent.

Profit for the fourth quarter was $9.31 billion, or $3.04 per share, for the three months ended Dec. 31, the bank said on Friday. That compares with $11.01 billion, or $3.57 per share, a year earlier. Annual earnings hit a record $49.6 billion.

The bank reported a 12 per cent jump in revenue to $38.57 billion.

JPMorgan and several major banks are taking a hit to their quarterly profits as they are required to pay a bulk of the $16 billion to replenish the Federal Deposit Insurance Corporation's deposit insurance fund (DIF), which was drained after Silicon Valley Bank and Signature Bank failed last year. (Reporting by Niket Nishant in Bengaluru and Nupur Anand in New York; Editing by Lananh Nguyen and Saumyadeb Chakrabarty)