JPMorgan Chase posted a surprisingly steep profit drop and said it is halting share buybacks and set aside $428 million for potential loan losses, signaling pessimism about the economy.
The nation’s largest bank said its earnings slumped 28%, falling to $8.65 billion or $2.76 per share Thursday — missing analyst expectations it would earn $2.88 per share, according to data from FactSet.
The financial behemoth helmed by Jamie Dimon also missed expectations for revenue — reporting $31.63 billion rather than the $31.95 billion FactSet analysts predicted.
In a statement, Dimon said the economy and job market remain healthy for now but predicted it likely won’t last for long.
“Geopolitical tension, high inflation, waning consumer confidence, 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,” Dimon warned in a statement.
The cautious tone was in line with comments Jamie Dimon made last month when he predicted an “economic hurricane” is coming.
Profits at the consumer bank fell 45% and profits at the investment bank fell 26%. The losses were partially offset by trading fees which jumped 15% in the second quarter.
The pessimistic forecast is a sharp turn of events from the last few years when banks raked in massive investment banking fees and market volatility pushed revenue higher.
JPMorgan reported a record year in 2021 — hauling in $48.3 billion in 2021. JPMorgan’s pre-pandemic record was $36.4 billion.
But the banks has faced headwinds in both the first and second quarter of 2022.
JPMorgan shares closed at $108 Thursday — down 3.5%. JPMorgan shares are down 30% this year.
Morgan Stanley also reported losses Thursday, with earnings plunging 29% year over year as the boom in deal-making, which pushed profits higher last year, flatlined.
The investment bank reported second-quarter profits of $2.5 billion or $1.39 per share — missing analyst expectations of $1.56 per share, according to data from FactSet. Morgan Stanley’s revenue was $13.1 billion — less than the $13.39 billion analysts expected.
While Morgan Stanley’s investment banking revenue fell 55%, its trading revenue jumped 21% in the quarter — offsetting some of the losses.
Chief Executive Officer James Gorman said the quarter was “solid” despite overall market volatility. However he conceded that a downturn could be on the horizon, “We might head into some kind of recession.”
But Gorman added the bank isn’t in crisis mode.
Gorman emphasized wealth management, which brings in 44% of the firm’s total revenue, remains strong even as it dropped 6% this quarter. The Wall Street giant continues to reap the benefits of acquisitions including investment management company Eaton Vance and trading platform E*TRADE.
Morgan Stanley was also hit with a $200 million fine this quarter for employees using personal, unauthorized devices to conduct company business.
Unlike JPMorgan, Morgan Stanley announced no changes to its share buyback plan.
Morgan Stanley stock closed at $74.69 per share — down 0.4% Thursday and down 25% year to date.
Other Wall Street financial heavyweights like Wells Fargo and Citibank are expected to report results on Friday, while Goldman Sachs and Bank of America will report Monday.