• JPMorgan’s Q1 revenue and profits rose, but NII fell for the first time since 2021.
• Shares dropped 7.3% due to concerns over high inflation.

In the first quarter, JPMorgan reported a revenue of $42.5 billion, reflecting an 8% increase compared to the same period last year. The company’s profits also rose, achieving a 6% growth to $13.4 billion, or $4.44^[1] per share, surpassing expectations.

Net interest income (NII), a crucial measure of profitability that tracks the difference between interest earned on loans and interest paid on deposits, declined for the first time since 2021. This metric significantly contributed to the bank’s record profits in the previous year.

Looking ahead to the full year of 2024, JPMorgan’s NII is expected to remain relatively stable at $89 billion, only $1 billion above earlier forecasts. This adjustment comes as the bank faces rising deposit costs. Despite investor anticipation of a $2 billion to $3 billion increase, the projection has been set lower.

The news impacted the financial markets, leading to a decline in bank stocks and exerting pressure on the broader market. Shares of JPMorgan dropped 7.3% to $183^[2], marking the largest percentage fall in almost four years. This occurred even though the bank reported earnings that exceeded analyst predictions.

It appears that uncertainty in deposit pricing is causing difficulties, even for the largest banks, which struggle to accurately forecast changes for this year. The prevailing market sentiment, which anticipates prolonged higher interest rates, has adversely affected deposit levels at the largest bank in the US.

Additionally, troubling developments in the Middle East have not gone unnoticed, leading to renewed concerns about inflation. As a result, inflation expectations for the year have increased, intensifying worries that the Federal Reserve may not be able to reduce interest rates soon.

Up until now, the Goldilocks economy has significantly benefited the largest banks. American employers have maintained strong job growth, and consumers have kept up their spending and borrowing habits despite the Federal Reserve’s fastest interest rate hikes in decades. The corporate sector has also been active in the debt markets, and there has been a noticeable rebound in Wall Street dealmaking after a two-year downturn.

However, the economy’s continued strength also contributes to persistently high inflation, compelling the Federal Reserve to maintain elevated interest rates. Recent data have diminished expectations for a Fed rate cut in June, and it is becoming increasingly apparent that high-interest rates may persist.

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