Jamie Dimon's Reality Check

For all the fears of a banking crisis rippling through the financial system, JPMorgan Chase & Co. on Friday reported minting a record amount of money in the first quarter. Its revenue surged past $38 billion, beyond Wall Street analysts’ expectations. The bank drew in billions’ worth of deposits as customers fled the likes of Silicon Valley Bank and other regional institutions. JPMorgan’s deposit base, at $2.37 trillion, is larger than the gross domestic product of Italy.

To add just another cherry to the pile of cherries: JPMorgan said it would make billions more in income from lending than it had initially projected.

But its chief executive officer hasn’t let go of an underappreciated risk in the market. “People need to be prepared for the potential for higher rates for longer,” Jamie Dimon said on a conference call with banking analysts. “It will undress problems in the economy.”

Interest rates have been extraordinarily volatile. Even if inflation comes down, Dimon said it could be stickier than most people expect. That would mean rates would have to stay higher for longer to keep fighting rising prices. That scenario would increase lending revenue for a bank such as JPMorgan—but it’s also a very sharp double-edged sword. Higher rates mean plunging bond values, too, and we’ve seen the pain that’s rippled across regional banks worried about weaknesses in their bond portfolios.

Read more on the big bank windfall from rates, that roiled small banks .

It’s not that it would necessarily happen, but Dimon said investors should be prepared for the two-year Treasury yield, which was around 4% on Friday, to hit 6%. That’s about a full percentage point higher than what the market expects.

There’s also a question about just how much banks can raise deposit rates to draw in customers. Even for Fortress Dimon, deposit outflows are expected to continue as clients seek higher yields in places such as money-market accounts. The deposits JPMorgan brought in during the regional banking tumult might be flighty and leave as fast as they’ve arrived.

There’s also very little visibility on how business will fare into next year: For 2024, "We know very little,” Dimon said.

Regional banks and credit card companies are set to deliver results over the next few weeks, and the market will be parsing them for any signs of stress. The first midsize bank to report, Pittsburgh-based PNC Financial, said deposits were actually higher than analysts expected.

As Mohamed El-Erian told my colleagues, it’s less of a banking crisis and more of a “banking tremor.”

Wall Street Jobs

Citigroup and JPMorgan both reported higher employee expenses, partly because of wage inflation but also because they had more people on staff than they did a year ago. Citi added 8,000 people to its technology division as the bank continues its efforts to modernize.

But don’t think there’s a hiring spree underway. JPMorgan, which is also reminding its staff that it expects leaders back in the office for five days a week, warned that the year’s headcount is likely to be flat. Wells Fargo has been steadily dropping its staffing levels. And uncertainty about profit areas over the next year means the jobs story is still creating anxiety.

Who's News

Josh Harris is building out his sports empire after his exit from Apollo with a $6 billion bid to buy the Washington Commanders, he leads the group . Goldman Sachs reshuffled a group of trading executives after a key money-maker left, while also elevating Nishi Somaiya to lead the private wealth lending business after her success co-leading the business that invested in high-flying startups. UBS has held talks with its former wealth executive Tom Naratil about returning to the firm as Sergio Ermotti reaches out to former colleagues. Andrew Golden is retiring as Princeton's endowment chief after almost three decades at the helm . Kathleen McCarthy Baldwin , the co-head of global real estate at Blackstone, spoke to Bloomberg Television after the firm raised a record, $30.4 billion drawdown fund targeted toward the property market . Former Citadel traders Jonas Dietrich and Dave Sutton are set to launch their hedge fund with about $1.7 billion in one of the year’s biggest debuts.

(MUCH) More to Come

Keep your eyes on Bloomberg TV: Schwab reports results on Monday -- the company that bet big on its bank rather than its brokerage -- with big questions in the market. Then as we head into the week there's Goldman, Morgan Stanley and all the regional banks that will give a better sense of what the credit contraction really looks like. I'll also be looking forward to covering the big private asset managers with Blackstone kicking off the wave on Thursday. They'll set the tone for Milken conversations at the turn of the month. Credit markets have been moving to non-banks "rapidly and dramatically," as Jamie Dimon said today, so am excited to get that read out for you from Los Angeles soon. Questions, tips, ideas & opinions please send to [email protected] .