JPMorgan Chase, the largest bank in the US, earned 8,649 million dollars (8,606 million euros at current exchange rates) from April to June, 28% less than in the same period last year, but slightly above the earnings of the first quarter (8,300 million). The entity has reported a provision of funds to cover credit losses amounting to 1,100 million. The results have not met analysts’ expectations and its shares have fallen more than 4% on Thursday, dragging down the general index, with the S&P 500 losing almost 1%. The entity has decided to temporarily suspend the repurchase of its own shares to reinforce its capital levels while its executive director, Jamie Dimon, assured in a statement that he was “aware of the economic uncertainties” to come.
For its part, the income of the Morgan Stanley investment bank also collapsed due to the slowdown in the capital markets, noting a net profit of 2,391 million dollars (2,379 million euros) between April and June, which is equivalent to a decline of 32% compared to the same period last year. Morgan Stanley shares have lost 23% in the first six months of the year, their worst performance for two consecutive quarters in more than a decade, according to the Bloomberg agency.
The investment banking group posted the worst results, while the business unit helped offset the loss, as fixed income revenue rose amid heightened volatility and as clients rushed to reposition their accounts. .
However, unlike JPMorgan, Morgan Stanley announced a new buyback of shares, up to 20,000 million shares of the company, although without providing details on the deadline. Buybacks have raised issues with regulators in the past, because of the possibility that in times of economic turmoil the use of cash for the transaction would deplete the capital originally intended to cover credit losses.
Slowing demand and sinking markets have ended a period of record profits for the country’s biggest banks, but that doesn’t mean a recession is imminent, top bankers say, even as they show signs of slowing. prepare for such an eventuality. For JPMorgan executives, there are few signs, if any, that the US economy is entering a recession. “We have looked very carefully at our actual data,” said Jeremy Barnum, the bank’s chief financial officer, in a call with reporters picked up by New York Times. “There is essentially no evidence of real weakness.”
Retail banking customers continue to spend on goods and services they want but don’t need, such as travel and restaurants, and companies JPMorgan lends to are making greater use of some lines of credit, two signs that economic activity, so far, it has managed to maintain traction despite the general increase in prices.
Rising inflation, which reached 9.1% in June, and the Federal Reserve’s efforts to help combat it have put investors on alert about the possibility of a recession and the indirect effect that an economic contraction can have. for financial institutions. Expectations that the Fed will hike interest rates by 100 basis points at the end of July add to the concern.