When JPMorgan Chase posts earnings Friday morning, Wall Street won’t just be looking at the results from the nation’s largest bank, it will also be considering the broader health of the sector—but it’s important to remember that JPMorgan is an outlier.
So far JPMorgan has been spared the worst of the effects of higher-for-longer interest rates. It was able to acquire the failed First Republic Bank from the Federal Deposit Insurance Corporation at attractive terms and JPMorgan’s stock has held up well. Shares of JPMorgan are up 9% this year while the KBW Nasdaq Bank Index is down by 24%.
While JPMorgan has largely been immune to the ills of the banking industry, it is well aware of the macroeconomic and geopolitical forces that have the potential to wreak havoc on the economy. Most recently, banks have had to contend with interest rates soaring ever higher. Last week, the yield on the 10-year Treasury note hit its highest level since 2007. Not only do higher rates lift funding costs for banks, there is another downside. When loan growth was low, banks invested excess capital into Treasury bonds and other securities.
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