As the first major wave of first quarter earnings are coming out, investors paying close attention to how America’s largest companies have been faring. JP Morgan (NYSE: JPM) has gotten the most scrutiny from yesterday’s results, as banking stocks are seen as a barometer for the overall health of the economy. On that note, JP Morgan didn’t fare that well in its most recent Q1 report. What’s more, long time CEO Jamie Dimon warned Americans that the U.S. economy is under grave threat, and set aside even more money in reserves.
Dimon said that based on what his bank was seeing, American growth will still be ongoing and that the low delinquency numbers and healthy consumer balance sheets was a good sign for the moment. However, despite this, Dimon surprised analysts by announcing his bank would be setting aside another $900 million in funding in case of an economic downturn. That’s on top of the $5.2 billion the company reserved a year ago in case of potential loan losses during the pandemic’s early months.
The idea is that these extra funds could help cushion the bank in case of losses if we see a recession. Dimon, in a statement, said that the Russian invasion of Ukraine as well as high inflation were already creating “powerful forces” that could seriously damage the American economy.
“Those are very powerful forces, and those things are going to collide at one point. No one knows what’s going to turn out,” said Dimon. “The Fed needs to try to manage this economy and try to get to a soft landing.”
JP Morgan reported a profit of around $8.3 billion for its Q1 2022 quarter. That’s already lower than analysts were expecting, and much lower than last year’s $14.3 billion. Revenue numbers were also down 5%, falling to $30.7 billion. However, at least these numbers were slightly above Wall Street’s consensus targets.
The bank also saw credit charges of $1.5 billion. Additionally, the bank took $524 million in losses related to the company’s exposure to Russia, as well as loses taken on commodity investments prior to the Ukraine war breaking out.
Other data from JP Morgan worth mentioning is that spending on credit cards was up around 29%, while Americans were spending 64% more on travel and entertainment. Rising consumer debt among Americans might not be a good sign, but it’s still far from reaching a worrisome level yet.
Following Dimon’s comments and JP Morgan’s results, shares of the big bank was down around 3.5%. Most analysts are already expecting profits to decline for the other major U.S. banks, which will mostly be reporting their results on Thursday. According to FactSet, analysts are expecting the combined Q1 earnings of S&P 500 banks to reach $27 billion, a 37% reduction from last year’s results.
JP Morgan Company Profile
JPMorgan Chase is one of the largest and most complex financial institutions in the United States, with nearly $4 trillion in assets. It is organized into four major segments–consumer and community banking, corporate and investment banking, commercial banking, and asset and wealth management. JPMorgan operates, and is subject to regulation, in multiple countries. – Warrior Trading News
