JPMorgan Chase posted a surprisingly steep profit drop and said it is halting share buybacks and setting aside $428 million for potential credit losses, signaling gloom about the economy.
The country’s largest bank said its profit plummeted 28% to $8.65 billion, or $2.76 a share, on Thursday, below analysts’ expectations it would earn $2.88 a share, according to FactSet data.
The Jamie Dimon-led financial giant also missed revenue expectations, reporting $31.63 billion instead of the $31.95 billion FactSet analysts had forecast.
In a statement, Dimon said the economy and job market remain healthy for now, but predicted it probably won’t last long.
“Geopolitical tension, high inflation, declining consumer confidence, uncertainty about how high rates need to be, and never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its deleterious effect on the global energy and food prices are very likely to have negative consequences on the world economy in the future,” Dimon warned in a statement.
The cautious tone was in line with comments Jamie Dimon made last month when he predicted an “economic hurricane” was brewing.
Earnings at the consumer bank fell 45% and earnings at the investment bank fell 26%. The losses were partially offset by commercial rates that increased 15% in the second quarter.
The gloomy forecast is a sharp turn of events in recent years, when banks charged massive investment banking fees and market volatility pushed earnings higher.
JPMorgan reported a record year in 2021: It raised $48.3 billion in 2021. JPMorgan’s pre-pandemic record was $36.4 billion.
But banks have faced headwinds in both the first and second quarters of 2022.
JPMorgan shares were trading around $112 a share in premarket trading on Thursday, down nearly 3.5%. JPMorgan shares are down almost 30% this year.
It’s going to be a busy week for Wall Street with major firms including Goldman Sachs and Morgan Stanley also reporting earnings over the next week.