NEW YORK--JPMorgan Chase & Co's JPM.N Chief Executive Jamie Dimon warned of economic uncertainties arising from Russia's invasion of Ukraine and soaring inflation, after first-quarter profits at the largest U.S. bank slumped 42%.
JPMorgan had reported record profit during the first quarter last year, benefiting from a dealmaking boom after the Federal Reserve pumped liquidity into capital markets to mitigate the economic impact of the COVID-19 pandemic. This year, however, investment banking revenues declined as companies delayed takeovers and stock market listings amid a surge of volatility in equity markets. The bank also set aside $902 million to cover potential loan losses.
JPMorgan is seen as a bellwether for the U.S. economy and its lackluster results set the tone for first-quarter earnings from Wall Street banks as the Fed looks to rein in inflation and the trading bonanza banks enjoyed during the pandemic tapers off.
"Inflation and Ukraine are powerful forces that threaten the economy," Dimon said on a call with media, underscoring a change in his bullish outlook for the U.S. economy. "The Fed needs to try to manage this economy and try to get to a soft landing, if possible."
Pressed on whether the U.S. could face a recession, Dimon said: "I am not predicting a recession. Is it possible? Absolutely."
JPMorgan shares were down 2.8% in afternoon trading. Other bank stocks also fell. Citigroup and Bank of America were both down 0.9%.
JPMorgan's Common Equity Tier 1 (CET1) ratio, a key measure of financial strength, fell to 11.9% from 13.1% in December. That could hamper its ability to buy back shares, analysts said.
The bank will buy back less stock this year than in 2021, Chief Financial Officer Jeremy Barnum told analysts. Questioned by analysts about the broader outlook for the current year, Dimon said there were "storm clouds on the horizon," including the war in Ukraine, which Russia calls a "special military operation."
"Usually wars don't necessarily affect the global economy in the short run. But there are exceptions to that. This may very well be one of them," he said.
Dimon's tone on the economy was less optimistic than in the past and that weighed on the stock, said Christopher Marinac, research director at Janney Montgomery Scott. "Jamie is one of those people who will tell you what you need to hear, not necessarily what you want to hear," he said. "A lot of people want to hear that everything is fine and he's not telling you that."
