JPMorgan profit falls 28%, Dimon cautious on global economy

[July 14, 2022]  (Reuters) -JPMorgan Chase & Co reported a bigger-than-expected 28% fall in second-quarter profit on Thursday as America's largest bank set aside more money to cover potential losses in the face of growing risks of a recession.

The bank's shares slid more than 4% as it 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..

Chief Executive Jamie Dimon flagged a number of concerns including geopolitical tension, high inflation, waning consumer confidence 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.

The bank posted a profit of $8.6 billion, or $2.76 per share, missing the average analyst expectation of $2.88 per share, according to Refinitiv.

Other large U.S. banks including Citigroup and Wells Fargo, Morgan Stanley will report results this week, while Goldman Sachs and Bank of America will round out big bank earnings season next week.

Analysts have forecast a sharp decline in second-quarter earnings from a year ago, when banks released loan loss reserves and benefited from a boom in dealmaking.

The company also temporarily suspended share buyback to further shore up its capital levels.

JP Morgan CEO Jamie Dimon looks on in a meeting with France's President Emmanuel Macron during the 5th edition of the "Choose France" Business Summit, at the Palace of Versailles, southwest of Paris, France, July 11, 2022. Ludovic Marin/Pool via REUTERS

JPMorgan's earnings hurt the broader market with U.S. stock index futures extending losses after the earnings.

DEALS DOWN

Investment banking revenue fell 61% to $1.4 billion, mainly hurt by lower fees from deals and debt and equity issuances.

Like rivals Goldman Sachs and Morgan Stanley, JPMorgan last year rode the dealmaking wave and advised on several major business combinations, underwrote some of the biggest stock market flotations and helped put together deals involving special purpose acquisition companies.

However, Russia's invasion of Ukraine in February and fears around an economic recession dealt a blow to merger and acquisition (M&A) activity in 2022. The value of announced deals globally in the second quarter dropped 25.5% year-on-year to $1 trillion, according to Dealogic data.

M&A activity in the United States also plunged 40% to $456 billion in the second quarter.

The bank reported net revenue of $31.6 billion, up 1%, while net interest income was $15.2 billion, up 19% in the quarter.

(Reporting by Noor Zainab Hussain and Niket Nishant in Bengaluru and David Henry in New York; Editing by Saumyadeb Chakrabarty)

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