By Niket Nishant and Nupur Anand
(Reuters) -JPMorgan Chase beat Wall Street estimates for the second-quarter with record profit even as its chief Jamie Dimon cautioned about unprecedented economic risks.
The largest U.S. lender's profit climbed as it earned more from borrowers' interest payments and benefited from the purchase of First Republic Bank (OTC:FRCB).
While Dimon said the U.S. economy remained resilient, he struck a cautious tone about the effects of stubborn inflation, rising interest rates and the war in Ukraine.
"The consumer is in good shape, they're spending down their excess cash," Dimon said. "But the headwinds are substantial and somewhat unprecedented," he said on a conference call.
The bank bought a majority of failed First Republic Bank's assets in a government-backed deal in May after weeks of industry turbulence.
That bolstered its net interest income (NII) to a record high, which measures the difference between what banks earn on loans and pay out on deposits.
The bank's NII, which has also been gaining from high interest rates, was $21.9 billion, up 44%, or up 38% excluding First Republic
The bank forecast NII of about $87 billion for the full year, higher than the $83.37 billion expected by Wall Street, according to Refinitiv IBES data.
Chief Financial Officer Jeremy Barnum said he expects NII to be substantially lower because of market uncertainty, but he did not provide a specific timeframe for the expected decline.
JPMorgan (NYSE:JPM)'s profit climbed 67% to $14.47 billion, or $4.75 per share, for the quarter ended June 30. Excluding one-time costs, the bank earned $4.37 per share, comfortably above analysts' average estimate of $4.00 per share.
The bank also set aside a $2.9 billion provision for credit losses, more than doubling from last year, to brace for souring loans.
"It was very hard to find anything wrong with JP Morgan’s earnings," said Octavio Marenzi, CEO of consultancy firm Opimas.
"Consumer banking was particularly strong, but even investment banking, which has been a problem child over the past year or so, is starting to show signs of life."
JPMorgan's diversified businesses and acquisition of First Republic bank has helped the bank solidify its position with strong set of numbers, analysts said.
Shares of JPMorgan edged 0.1% lower to $148.72 in late morning trading.
'GREEN SHOOTS'
The better-than-expected results come against the backdrop of a possible end to Federal Reserve's rate hikes that have swelled profits at big U.S. banks in the past few quarters.
Expectations that inflation has peaked and that the Fed is nearing the end of its tightening campaign, have boosted sentiment across markets and helped the S&P 500 index post a 17.46% gain so far this year, as of last close.
Even so, the bank remains cautious.
"I would just caution against jumping to too many super positive conclusions based on a couple of recent prints," Barnum said.
While the monetary tightening campaign has stalled mergers and acquisitions - another major source of income for banks, a flurry of initial public offerings has raised hopes of a nascent recovery in capital markets activity.
Some "green shoots" are emerging, Barnum said, but it is still too early to call it a trend.
Investment banking revenue for the quarter climbed 11% to $1.5 billion. Markets revenue fell 10%, with both fixed income and equities trading taking a hit. The businesses fared better than the bank's outlook in May, when it said investment banking and trading revenue would decline 15%.
While JPMorgan has laid off employees in some of its businesses, its overall headcount rose 8% to a record 300,066.