JPMorgan Chase sees momentum in lending, no real-time credit deterioration

JPMorgan Chase & Co. said it continued to see positive trends in loan growth in the first quarter, with commercial demand picking up for both new loans and revolver utilization.

In January, the bank forecast 2022 loan growth in the high-single-digit percentage range. On an analyst call on first-quarter results, CFO Jeremy Barnum said "we've roughly seen that" during the period, with growth driven more by the wholesale business.

He also said the bank's "core thesis" for revolving credit card balances to recover to pre-pandemic levels by the end of the year "is still in place to a good approximation," with the "takeoff moment delayed by six weeks or so" because of the omicron coronavirus variant. He noted that higher revolving balances are also closely linked with higher net charge-offs.

"In general, industrywide loan growth outlook is quite robust," Barnum said when discussing the outlook for deposit growth. Loan growth should support industrywide deposit growth, helping to offset headwinds from tighter monetary policy. "Our base case remains modest growth in deposits for us as a company," Barnum said.

Overall, JPMorgan Chase's average loans increased 0.8% sequentially to $1.069 trillion. The sum of its average interest-bearing and non-interest-bearing deposits increased 1.9% to $2.516 trillion.

Barnum said the bank does not plan to deploy a significant amount of its excess liquidity into longer-duration securities. "Given the timing and expected speed of the rate hikes, increasingly, it just kind of doesn't matter that much," he said.

The bank maintained its previous guidance for 2022 net interest income, excluding its markets business, of more than $53 billion. Barnum said higher interest rates implied by markets would probably add "a couple billion dollars" to net interest income but that the bank would give more detail at its investor day May 23.

JPMorgan Chase added to its credit loss allowance in the first quarter, in part because of modestly higher probabilities for a recession in the models it uses to determine reserves.

But Barnum said the bank has yet to see any signs of fundamental credit deterioration in its portfolios.

"In this environment, everyone's looking very closely everywhere for any risks and trying to see around the corner," Barnum said. "But as of right now, we're really not seeing anything of concern in the kind of spot metrics, so to speak."