JPMorgan's profits foretell good economic fortunes

A banking customer uses an ATM at a Wells Fargo Bank branch.

Second quarter earnings reporting season kicked off today with Wells Fargo and JPMorgan Chase. The two banks reported higher profits, after a quarter in which interest rates rose sharply.

"The quality of the earnings, as they say, is not as good as it would seem," says *Fortune Magazine's Leigh Gallagher. "Net interest income -- which is sort of the crucial gauge of bank profitability -- is on the decline. Loan balances are falling."

Gallagher adds, "But, at JPMorgan, their balances are rising. So they're also focusing more on asset management and less on trading. [Trading] is what got everyone into so much trouble, but which was hugely profitable. So it does look pretty strong for JPMorgan today."

"It's important to remember that JPMorgan's activities touch almost every part of the American economy," says FT Alphaville's Cardiff Garcia. "So to the extent that the U.S. economy as a whole is doing pretty well or at least getting better -- and it is -- JPMorgan's going to make a lot of money."

Listen to the full audio for more on the earnings and what's ahead for the Federal Reserve's Ben Bernanke.

And we've got your weekend #longreads -- stories you should be reading.

Leigh Gallagher chose:


CORRECTION: The original version of this article incorrectly identified where Leigh Gallagher works. She is an editor at Fortune. The text has been corrected.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...