JPMorgan Chase & Co said on Friday it set aside $1.4 billion in anticipation of a mild recession, even as it reported a better-than-expected quarterly profit on the back of strong performance at its trading unit.
Shares of the biggest U.S. bank fell about 3 percent in premarket trading as it kicked off quarterly earnings for corporate America that are expected to fall for the first time since the third quarter of 2020.
While Chief Executive Jamie Dimon said consumers were still spending excess cash and businesses remained healthy, he listed a number of uncertainties facing the economy.
“We still do not know the ultimate effect of the headwinds coming from geopolitical tensions including the war in Ukraine, the vulnerable state of energy and food supplies, persistent inflation… and the unprecedented quantitative tightening.”
The bank flagged a modest deterioration in its macroeconomic outlook, “reflecting a mild recession in the central case”.
US banks get ready for shrinking profits and recession
JPMorgan’s investment banking unit continued its poor run in the quarter, with revenue down 57% as corporate executives battened down the hatches to prepare for a potential recession instead of spending on deals.
Trading revenue, however, gained from market volatility as investors repositioned bets to navigate a high interest rate environment.
While fixed income markets trading revenue was up 12%, equity trading revenue was relatively flat, the bank said.
JPMorgan’s profit for the three months ended Dec. 31 was $11 billion, or $3.57 per share, compared with $10.4 billion, or $3.33 per share a year earlier.
Excluding items the company earned $3.56 per share, beating estimates of $3.07.
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