As the bank seeks to navigate an economy that is showing strength in many sectors but losing steam as interest rates continue to increase, JPMorgan Chase's profits plummeted by 28% in the second quarter.
(AP) NEW YORK — As the bank seeks to navigate an economy that is showing strength in many areas but losing steam as interest rates continue to increase, hurting both consumers and corporations equally, profits at JPMorgan Chase plummeted by 28% in the second quarter.
The largest bank in the country by assets reported a profit of $8.65 billion, or $2.76 per share, for the three months that ended in June on Thursday. Comparatively, at the same time a year ago had a profit of $11.95 billion, or $3.78 per share. A one-time release of loan loss reserves, or money the bank set aside to cover potentially risky loans during the pandemic, helped boost profits last year.
JPMorgan executives stated that the economy still appears to be in good shape, but it is unclear in which direction it will move. A "storm" may be headed for the economy, CEO Jamie Dimon warned earlier this summer, citing the Federal Reserve's efforts to combat inflation, the conflict in Ukraine, and other issues.
In a conference call with journalists on Thursday, Dimon stated, "I haven't changed my view in the least." "The drawbacks I mentioned, the future risks, are still the same risks. Compared to previously, they are closer.
The chance of a catastrophic downturn was not something Dimon wanted to quantify, but he did say that "we're going to be prepared for it and service our clients."
Last quarter, the New York bank increased its loan-loss reserves, setting aside $428 million to cover defaults in the case of a recession or other cataclysmic calamity. To save money, JPMorgan has also suspended its share repurchase program.
JPMorgan's performance fell short of what Wall Street had anticipated. According to FactSet's survey of analysts, the bank was projected to make $2.89 in earnings per share. The company's shares, one of the biggest drags on the S&P 500's decline, dropped 3.5% to close at $108.
Due to fewer agreements, investment banking revenue decreased by nearly 60%, but market revenue increased by 15% as a result of outstanding performances in both the trading of stocks and bonds.
Due to the absence of the credit reserve release from the prior year, consumer banking revenue was $3.1 billion, a 45% decrease from the same period last year.
Bank stock prices have suffered significantly this year as a result of investors' concerns that the Federal Reserve may cause a recession in the United States to fight inflation. In the event of a recession, some Americans would lose their employment and probably begin to default on their loans. The additional earnings that banks have made from higher interest rates have been more than offset by these anxieties.
The KBW Bank Index is down 25.6% while JPMorgan shares are down 31.8% so far this year.
In the second quarter, the bank's total revenue increased to $30.7 billion from $30.5 billion in the corresponding quarter last year.
The soaring inflation sweeping the globe, according to JPMorgan executives, is having an impact on customers, who are paying more on gas and other necessities. However, for the time being, at least, consumers are continuing to spend money on things like restaurants, travel, and other non-essentials. At the same time, CEOs of companies claim that the situation is generally favorable, according to Dimon.
In the conference call with reporters, CFO Jeremy Barnum stated, "We looked at our actual data, our actual performance from this quarter, very thoroughly. "There's no indication of any real weakening."
The question is about the forecast, and we've talked a lot about it, said Barnum.
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