JPMorgan beats profit estimations

Even as it announced a better-than-anticipated quarterly profit thanks to strong results at its trading unit, JPMorgan Chase & Co. said on Friday that it had set aside $1.4 billion in preparation for a slight recession.

In premarket trading, shares of the largest U.S. bank dropped by around 3% as it began reporting quarterly results for corporate America, which are anticipated to decline for the first time since the third quarter of 2020.

Although Chief Executive Jamie Dimon claimed that consumers were still spending extra money and that businesses were in good health, he identified a number of economic risks.

We are still unsure of the full impact of the geopolitical headwinds, such as the conflict in Ukraine, the precarious situation of the energy and food supply, the ongoing inflation, and the unprecedented quantitative tightening.

In its macroeconomic outlook, the bank noted a little decline that “reflects a moderate recession in the central case.”

Corporate leaders battened down the hatches to prepare for a future recession rather than spending on acquisitions, which resulted in a 57% decline in revenue for JPMorgan’s investment banking division during the quarter.

JPMorgan

However, market turbulence increased trading revenue as bets were repositioned by investors to navigate a high interest rate environment.

Equity trading revenue was almost steady, the bank reported, despite fixed income markets trading revenue increasing by 12%.

Thanks to the United States Federal Reserve’s tightening of its monetary policy through rate hikes, the bank’s net interest income, excluding markets, increased by 72% to $20 billion.

The Federal Reserve has started to ease off the gas after steadily raising its benchmark federal funds rate for the most of last year, realizing that the effects of rate increases frequently take time to trickle down to the economy.

In contrast to the average estimate of $75.15 billion provided by Refinitiv data, the bank stated that it anticipates 2023 net interest income of $74 billion, excluding markets.

But Fed Chair Jerome Powell has also downplayed hopes for a turnabout in the foreseeable future, raising the likelihood of a recession.

In response, banks have reduced employment and set aside larger sums of money to cover poor loans. Over 3,000 employees are being let go by investment giant Goldman Sachs (GS.N), according to reports.