Home New loan JPMorgan (JPM) Second Quarter 2022 Results

JPMorgan (JPM) Second Quarter 2022 Results

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JPMorgan Chase said Thursday that second-quarter profits fell as the bank built up $428 million in bad debt reserves and suspended share buybacks.

Here’s what the company reported compared to what Wall Street expected, based on a Refinitiv analyst survey:

  • Earnings per share: $2.76 vs. $2.88 expected
  • Managed revenue: $31.63 billion vs. $31.95 billion expected

Earnings fell 28% from a year earlier to $8.65 billion, or $2.76 per share, primarily due to stockpiling, New York-based JPMorgan said. York, in a statement. statement. A year ago, the bank received a reserve release of $3 billion.

Managed revenue edged up 1% to $31.63 billion, helped by a tailwind from rising interest rates, but was still below analysts’ expectations, according to a Refinitiv survey.

“The U.S. economy continues to grow, and the labor market and consumer spending, as well as their ability to spend, remain healthy,” CEO Jamie Dimon said in the statement. “But geopolitical tensions, high inflation, declining consumer confidence, uncertainty about rising rates and unprecedented quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its effects adverse effects on global energy and food prices are very likely to have negative consequences for the global economy at some point.”

Dimon said the bank chose to “temporarily” suspend its share buybacks to help it meet regulatory capital requirements, a prospect feared by analysts earlier this year. Last month, the bank was forced to keep its dividend unchanged while rivals increased their payouts.

The bank’s shares fell 2.5% in premarket trading.

JPMorgan, the largest U.S. bank by assets, is being watched closely for clues about how the banking sector fared in a quarter marked by contradictory trends. For one thing, unemployment levels have remained low, meaning consumers and businesses should have little difficulty repaying their loans. Rising interest rates and loan growth mean banks’ core lending business is becoming more profitable. And financial market volatility has been a boon for bond traders.

But analysts have started to cut earnings estimates for the sector on concern over a looming recession, and most big bank stocks have fallen to 52-week lows in recent weeks. Revenue from capital markets and mortgage lending activities fell sharply, and companies could disclose further writedowns amid the broad decline in financial assets.

Importantly, a tailwind that the sector enjoyed a year ago – reserve releases as lending performed better than expected – has started to reverse, with banks being forced to put in set aside money for possible defaults as the risk of recession increases.

In April, JPMorgan was the first of the banks to start setting aside funds for loan losses, taking a $902 million charge for building up credit reserves in the quarter. This fits with the more cautious outlook expressed by Dimon. In early June, he warned that an economic “hurricane” was on the way.

Given this outlook, banking analysts may wonder whether management can adjust spending downwards in response to the business environment.

One of the company’s tailwinds is rising US rates. JPMorgan said at the company’s Investor Day in May that it could hit a key 17% return target this year, ahead of schedule. In fact, the bank reached that level this quarter.

JPMorgan shares have fallen 29% this year through Wednesday, worse than the 19% drop in the KBW banking index.

Morgan Stanley also reported earnings on Thursday and, like JPMorgan, its results were below Wall Street expectations. The bank was hit by a decline in investment banking revenue.

Wells Fargo and Citigroup are expected to report results Friday and Bank of America and Goldman Sachs are expected to report Monday.

This story is developing. Please check for updates.