Dive Brief:
- Profit at JPMorgan Chase dropped 42% in 2022’s first quarter, compared with the same three-month span a year earlier — to roughly $8.3 billion from $14.3 billion, the bank reported Wednesday.
- The bank reported a $902 million net build in credit reserves. About $300 million of that total encompasses potential credit losses tied to Russia, CFO Jeremy Barnum said in a conference call Wednesday. The rest stems from an increased probability of what Barnum called a "Volcker-style, Fed-induced recession in response to the current inflationary environment," according to Bloomberg.
- Profit cratered by 26% in JPMorgan’s corporate and investment bank, which was stung by $524 million in losses related to commodities trading and Russia exposure. About $120 million stemmed from "extreme price movements" in nickel, Barnum said.
Dive Insight:
Double-digit percentage-point declines littered the first-quarter earnings report for the nation’s largest bank Wednesday. Rising interest rates sent home loan originations down 37% and auto loan originations down 25%. That contributed to a 57% drop in profit in JPMorgan’s consumer bank.
A 29% increase in credit-card spending and a 15% jump in credit-card loans represented bright spots in consumer banking. Deposits, meanwhile, saw an 18% uptick.
Profit dropped 28% at JPMorgan’s commercial bank and 20% in asset and wealth management, to $850 million and $1 billion, respectively.
Lower equity and debt underwriting activity pushed fees down 31% in global investment banking.
With that noted, some of the bank’s final figures did beat expectations. The bank’s fixed-income traders took in $5.7 billion over the quarter — $1 billion above analysts’ estimates. Equity traders also contributed $3.1 billion of revenue.
As of early March, trading revenue had been slumping 10% from 2021’s comparable time frame, Troy Rohrbaugh, the bank’s global head of markets, told investors, according to Bloomberg. But "things have changed a lot," he said.
The bank’s net interest income at JPMorgan increased 7% to nearly $14 billion. Total loans increased 6%. Meanwhile, revenue dropped 5% to roughly $30.7 billion.
Noninterest expenses rose 2% to just shy of $19.2 billion.
The bank’s reserve build, however, marked perhaps the quarter’s biggest turnabout. JPMorgan released $5.2 billion of its reserves in 2021’s first quarter.
"We remain optimistic on the economy, at least for the short term ... but see significant geopolitical and economic challenges ahead due to high inflation, supply chain issues and the war in Ukraine," CEO Jamie Dimon said Wednesday in a statement.
Dimon warned investors last week in his annual shareholder letter the bank could lose up to $1 billion from its Russia exposure.
Barnum, for his part, said Wednesday that roughly $600 million in Russia exposure remained beyond 2022’s first quarter.
"Our financial discipline, constant investment in innovation and ongoing development of our people are what enabled us to persevere in our steadfast dedication to help clients, communities and countries throughout the world even in difficult times," Dimon said Wednesday.
