JPMorgan Chase & Co reported a bigger-than-expected 28% fall in quarterly profit and suspended share buybacks on Thursday, as America’s largest bank set aside more money to cover potential losses in the face of growing risks of a recession.
Chief Executive Jamie Dimon stressed the need to build capital reserves, while flagging a number of concerns including the war in Ukraine, high inflation and the “never-before-seen” quantitative tightening as threats to global economic growth.
Closer home, however, the economy continues to grow and both the job market and consumer spending remain healthy, Dimon said.
JPMorgan’s shares slid more than 4% as the bank recorded $1.1 billion in provision for credit losses compared with last year when it released $3 billion from its reserves.
The four biggest U.S. banks are expected to record $3.5 billion of loss provisions for the quarter, as they brace for a sharp economic slowdown with the U.S. Federal Reserve aggressively raising interest rates to control runaway inflation.
JPMorgan posted a profit of $8.6 billion, or $2.76 per share, missing the average analyst estimate of $2.88 per share, according to Refinitiv.
“As far as the things that you don’t want to see, you’ve got pretty much every one of them,” Thomas Hayes, managing member at Great Hill Capital Llc in New York, said.
“Missing the top and bottom line, cutting the buybacks and increasing credit reserves are all things consistent with battening down the hatches for a recession,” he added.
The downbeat results hurt the broader market with U.S. stock index futures extending losses after the earnings. Morgan Stanley also reported a drop in second-quarter profit as dealmaking slumped.
Other large U.S. banks including Citigroup and Wells Fargo will report results this week, while Goldman Sachs and Bank of America will round out big bank earnings season next week.
