U.S. bank profits rise in first quarter

Profits at major U.S. banks beat forecasts in the first quarter as stock trading jumped, but executives on Friday warned of economic turbulence as sweeping tariffs could fuel risks and weigh on economic growth.

Equity traders at JPMorgan Chase

 and Morgan Stanley 

 brought in record revenue as markets boomed early in the year, while Wells Fargo 

 earned more fees from clients. But industry executives said consumers and corporations were becoming more cautious about U.S. President Donald Trump’s sweeping tariffs, which have roiled markets and could spur inflation and tip the economy into recession.

“The first quarter was a pretty good start to the year in terms of trading and even business activity, but what happens in the second quarter is still unknown, including the impact on markets, mergers and acquisitions,” said Brian Mulberry, portfolio manager at Zacks Investment Management. “It is going to be a tale of two different quarters.”

While it is too early to understand the full implications of the tariffs, households and businesses were starting to respond to the import levies, executives at the biggest U.S. lenders said.

“You’re starting to see maybe a little bit of pivoting from consumers pre-buying stuff that might be getting more expensive,” Jeremy Barnum, JPMorgan’s chief financial officer, told reporters. Corporate clients are in a wait-and-see mode, because “this level of policy uncertainty is one that makes it hard to plan for the long term.”

Corporations that are set to report their results in the upcoming weeks will probably withdraw their earnings forecasts given the uncertainty, JPMorgan CEO Jamie Dimon told analysts.

Shares of JPMorgan rose about 2.5 per cent, while those of Morgan Stanley and Wells Fargo fell 1 per cent and 3.5 per cent respectively.

The latest warnings add to a chorus of Wall Street executives ringing alarm bells about the potential economic damage from the tariffs, including Dimon, BlackRock CEO Larry Fink and billionaire fund manager Bill Ackman.

“I don’t usually pay that much attention to anecdotes, but this time I am,” Dimon told analysts.

Investors hoping for an end to wild market swings were reminded with Thursday’s stock-market plunge that shifting tariff plans remain a threat to earnings and the economy.

Corporate and commercial banking clients “are taking a step back saying, ‘you know, I need to get more clarity, certainty about where things are going,’” Wells Fargo CFO Michael Santomassimo told journalists.

Wells Fargo shares extended losses after the CFO said net interest income – the difference between what the bank earns on loans and pays on deposits – would be in the low end of its guidance this year as markets become more volatile.

Investment banking was a bright spot across Wall Street, with fees at JPMorgan climbing 12 per cent, while revenue rose 8 per cent at Morgan Stanley.

“Right now, this isn’t a financial event that’s going to be the genesis of the recession, and banks could be the safe space,” said David Wagner, portfolio manager at Aptus Capital Advisors, referring to tariffs.

Morgan Stanley CEO Ted Pick expressed more optimism than his counterparts, while acknowledging the risks posed by inflation and tariff policies. He said the U.S. economy could avoid recession and emphasized that the bank’s deal pipeline remained steady, even though uncertainty had prompted some clients to delay transactions.

“The emperor has no clothes right now. It’s obvious that nobody knows what’s coming,” said Colin White, CEO and portfolio manager at Verecan Capital Management.