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• JPMorgan earnings fell short of analyst expectations as the bank built reserves for bad loans by $428 million
• Dimon warned geopolitical tension, high inflation, and waning consumer confidence could hurt the economy
JPMorgan Chase & Co’s (NYSE: JPM) chief Jamie Dimon struck a cautious note on the global economy after the largest US bank reported that its profit declined 28% from a year earlier.
The bank also suspended share buybacks in the face of growing recession risks.
Dimon pointed out that though the US economy continues to grow and both the job market and consumer spending are healthy, he flagged several concerns and said the bank is bracing for potential loan losses by setting aside more money.
“Geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices, are very likely to have negative consequences on the global economy sometime down the road,” Dimon said in the press release.
He also stressed the need to build capital reserves due to increasing requirements from regulators.
JPMorgan’s shares slid more than 5% as the bank recorded $1.1 billion in provision for credit losses, including a $428 million boost in loss provisions.
Last year, the bank had released $3 billion from its reserves.
It posted a profit of $8.6 billion, or $2.76 per share, missing the Wall Street estimate of $2.88 per share.
Managed revenue edged up 1% to $31.63 billion, helped by the tailwind of higher interest rates, but was still below analysts’ expectations of $31.95 billion.
JPMorgan said its revenue from the business slid 61% to $1.4 billion in the second quarter ending June 30 amid the downturn in merger and acquisition (M&A) activities in the market.
Lower fees from fewer debt and equity issuances and a $257 million markdown on its book of bridge loans also hurt the investment banking business.
“Our bridge book, it’s smaller than it was because we priced ourself out of the market ... a lot of people can lose a lot of money there, and we lost a little,” Dimon told analysts on a call.
Picture Credit: Fortune
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