Large U.S. banks kicked off the first-quarter earnings report season by disclosing higher-than-expected profits. But their net interest income—a key performance indi🔴cator for the sector—ཧfell shy of projections.

Thanks primarily to surging revenue from investment banking and trading activities, JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C🌜) all surpassed consensus earni𓂃ngs projections from analysts surveyed by Visible Alpha.

However, net interest income at each declined from the fourth quarter. That's because interest rates that banks charge on loans may have risen with the Fed's rate hikes, but so have the banks' deposit costs—what they pay out on interest-bearing deposits.

At JPMorgan, the nation's largest bank, 澳洲幸运5官方开奖结果体彩网:net interest income dropped 4% from the previous quarter, falling for the first time in 11 quarters. Net interest income for the first three month🌠s of this year also fell 4% at Wells Fargo and 6% at Citigroup compared the prꦿior quarter.

Fed's No Longer Feeding Net Interest Income Growth

Because of low interest rates, U.S. banks for more than a decade struggled to earn much of a difference between what they charged for loans and paid on deposits. The Fed's interest rate increases to battle inflation in 2022-23 change🤡d that equation, and net interest income rose.

Friday's first-quarter data, though, indicate those halcyon days for banks may have ended, even as persistent inflation, emphasized by JPMorgan Chief Execut꧙ive Officer (CEO) Jamie Dimon in his comments accompanying the company's results, has dimmed the prospect of Fed rate cuts this year.

Compared with the first quarter of 2023, net interest income increased 11% at JPMorgan, though its purchase of troubled 澳洲幸运5官方开奖结果体彩网:First Republic Bank's assets last year accounted for most of the gain. Net interest income inched 1% higher at Citi compared with the same quarter a year ago but 澳洲幸运5官方开奖结果体彩网:fell 8% at Wells Fargo.

Overall, JPMorgan's net income rose 6% compared with a year ago. But profits fell 8% at Wells Fargo and plunged 27% at Citi.

Boost from Investment Banking, Trading

None▨theless, revenue and profit rose comfortably at all three banking giants from the fourth q💮uarter.

Reflecting the resilience of the U.S. markets and economy, earnings benefited from surging 澳洲幸运5官方开奖结果体彩网:investment banking and trading revenue. In addition, reduced provisions for credit losses signal that U.S. consumers remain in re🤪lativ﷽ely decent financial shape.

Investment banking units struggled throughout much of last year amid a dearth of 澳洲幸运5官方开奖结果体彩网:mergers and acquisitions (M&A). But as Moody's noted earlier this week, equity and bond issuance rose markedly in the fourth quarter, fueling a resurgence for large investment banks.

The continuing rally in the U.S. stock market provided plentiful opportunities for banks' trading desks, and they took advantage.

At Citi, for example, revenue in its Markets division though lower compared with the year-ago quarter, 澳洲幸运5官方开奖结果体彩网:rose 59% from the fourth quarter to almost $5.4 billion, and investment banking and corpora𒉰te lending revenue surged 68% to $1.8 billion. Combined, those gains accounted for the bulk of the firm's overall revenue increase.

Corporate and investment banking revenue increased 24% more than the prior quarter at both JPMorgan and Wells Fargo, constituting the bulk of overall revenue gains at those companies, as well.

Credit Goes to Consumers

Aiding profits for all three banks during the quarter: A de♏cline in the amount of money they set asid🎶e for potential loan losses.

Concerns have increased that consumers have run out of cash as 澳洲幸运5官方开奖结果体彩网:credit card balances rise. That also has heiꦍghtened worries that loan defaults will increase. But it's not a concern the big banks imparted in their first-quarter results.

All three banks reduced their provi🌼sions for credit losses considerably in the first quarter on a sequential basis.

One potential sign that consumers might have started pulling back, appeared, though. Loan balances for all three banks fell slightly during the quarter as interest rates remain high. If that continues, banks may have to reduce loan rates to drum up demand. That, in turn, would place further downward pressure on net interest income.