JPMorgan Chase on Thursday reported a smaller revenue for the second quarter than for a similar interval final 12 months, put aside extra money to cowl potential mortgage losses and mentioned it was suspending share buybacks. Those actions could also be seen as preparation for a downturn, but executives on the nation’s largest financial institution mentioned there have been few — if any — indicators that the U.S. economic system was getting into a recession.
Retail banking prospects are nonetheless spending cash on issues they need but don’t want, like journey and eating places. The companies JPMorgan lends to are making extra use of some credit score traces.
“We’ve looked a lot very carefully into our actual data,” Jeremy Barnum, the financial institution’s chief monetary officer, mentioned on a name with reporters. “There is essentially no evidence of actual weakness.”
JPMorgan’s earnings had been weighed down by sinking inventory costs, slower funding banking exercise and a softer marketplace for residence loans. It is feeling the results of rate of interest will increase the Federal Reserve is making to fight steep inflation, which has roiled monetary markets. Jamie Dimon, JPMorgan’s chief govt, mentioned bankers had been making ready for a doubtlessly rocky 12 months forward.
“We are dealing with two conflicting factors, operating on different timetables,” Mr. Dimon mentioned in a information launch. “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.”
8 Signs That the Economy Is Losing Steam
Card 1 of 9
Worrying outlook. Amid persistently excessive inflation, rising client costs and declining spending, the American economic system is displaying clear indicators of slowing down, fueling considerations about a potential recession. Here are different eight measures signaling hassle forward:
Consumer confidence. In June, the University of Michigan’s survey of client sentiment hit its lowest degree in its 70-year historical past, with almost half of respondents saying inflation is eroding their way of life.
The housing market. Demand for actual property has decreased, and development of recent properties is slowing. These tendencies might proceed as rates of interest rise, and actual property corporations, together with Compass and Redfin, have laid off workers in anticipation of a downturn within the housing market.
Copper. A commodity seen by analysts as a measure of sentiment in regards to the international economic system — due to its widespread use in buildings, automobiles and different merchandise — copper is down greater than 20 p.c since January, hitting a 17-month low on July 1.
Oil. Crude costs are up this 12 months, partly due to provide constraints ensuing from Russia’s invasion of Ukraine, but they’ve lately began to waver as buyers fear about development.
The bond market. Long-term rates of interest in authorities bonds have fallen under short-term charges, an uncommon prevalence that merchants name a yield-curve inversion. It means that bond buyers predict an financial slowdown.
JPMorgan earned $8.6 billion between April and June, 28 p.c decrease than the identical interval final 12 months, but barely larger than its first-quarter revenue of $8.3 billion. It put aside new reserves largely for potential losses on its loans in its client enterprise, reporting a provision for losses totaling $1.1 billion. The financial institution’s newest earnings missed analyst expectations, hitting its inventory, which fell about 5 p.c on the open of buying and selling.
But the financial institution remains to be issuing new bank cards, and card utilization was 15 p.c larger than final 12 months. Spending on journey and eating was 34 p.c larger.
For Wall Street, the charges the financial institution earned offering funding banking companies, like advising corporations on mergers and underwriting preliminary public choices, fell sharply. They had been 54 p.c decrease than the identical interval final 12 months, contributing to a 26 p.c drop in income for its Wall Street enterprise general. But the fast and dramatic swings within the costs of shares, bonds and different monetary merchandise brought about the financial institution’s income to rise 15 p.c from final 12 months in its buying and selling companies, which thrive throughout occasions of volatility.
The Fed has been elevating rates of interest and stopped its program for getting bonds to stabilize the markets throughout the pandemic, inflicting huge modifications within the markets. Other banks are feeling the results of this, too.
Profits at Morgan Stanley, which reported earnings on Thursday, additionally missed analyst expectations. The funding financial institution and funding agency’s earnings fell almost 30 p.c within the second quarter from the identical interval a 12 months in the past, to $2.4 billion. The latest market turmoil halted offers and brought about charges from inventory and bond choices to plunge.
JPMorgan additionally introduced that it was suspending buybacks of its inventory — a means of distributing further money to shareholders — to extra rapidly construct reserves of capital to fulfill reconfigured necessities set by regulators. Mr. Dimon informed reporters that with out the brand new regulatory necessities, the financial institution would “probably” nonetheless be shopping for again inventory.