Net income at JPMorgan Chase dropped nearly 30 per cent in the second quarter of the year, the bank said on Thursday as it announced it was suspending share buybacks to meet tougher new capital requirements imposed by the Federal Reserve.
Results at the largest US bank by assets missed analysts’ expectations. Net income for the quarter was $8.2bn, or $2.76 per share, down from $11.5bn, or $3.78 per share, in the same period last year. Analysts had forecast quarterly net income to be down at $8.5bn, or $2.90 per share, according to consensus data compiled by Bloomberg.
This was the first time since the first quarter of 2020 that JPMorgan has missed profit expectations, according to FactSet, setting a downbeat tone for earnings at other US banks.
Higher revenues from lending amid rising interest rates as well as robust earnings from trading from volatile markets failed to offset a slump in dealmaking.
In a statement, chief executive Jamie Dimon said the bank had “temporarily suspended share buybacks” after the Fed hit it last month with a higher capital requirement.
JPMorgan’s stock was down about 2.5 per cent in pre-market trading in New York on Thursday.
JPMorgan added a net $428mn to credit reserves in the quarter amid growing worries that interest rate rises by the Fed will tip the US economy into a recession. Earnings a year earlier were flattered by $3bn of reserve releases.
Dimon said the global economy was dealing with “two conflicting factors” of a strong US jobs market and consumer spending, counterbalanced by geopolitical tensions, high inflation, waning consumer confidence, quantitative tightening and rising rates.
In the immediate term, JPMorgan is benefiting from rising rates. The bank reported net interest income, which is the difference between what it pays on deposits and what it earns from loans and other assets, of $15.1bn, up 19 per cent year on year. This was the biggest such increase in more than 10 years.
JPMorgan lifted its target for net interest income for 2022, excluding its markets business, to more than $58bn, from more than $56bn previously.
Revenues in JPMorgan’s trading division, which has benefited from heavy activity during the recent market volatility, were up 15 per cent at $7.8bn, remaining above pre-pandemic levels and in line with analysts’ forecasts.
However, the economic uncertainty is also having a chilling effect on dealmaking, with investment banking revenue down 61 per cent at $1.35bn, below analysts’ estimates for $1.9bn.
Additional reporting by Imani Moise in New York
