JPMorgan warns of inflation and increases its provision for credit defaults

The largest bank in the United States, JPMorgan Chaseannounced on Friday an increase in profits and income in the second quarter of the year, but warned about “inflationary forces“which may force interest rates to remain high for longer and increased their provision for credit defaults.

JPMorgan posted quarterly profit of $18.149 billion, up 25% from the same period in 2023, and revenue of $50.2 billion (up 22%) fueled by a gain of $7.9 billion from certain changes in its stake in Visa, according to a statement.

In addition to the additional income from the stake in Visa – without which the quarterly profit would be lower than in the same period of 2023 – the bank’s accounts include an increase in the provision for credit losses, of US$ 3,052 million, a sign of prudence in the face of the uncertainty expressed by its top management.

The firm’s chief executive, Jamie Dimon, one of the most listened to voices on Wall Street, applauded the results, but pointed to its dependence on the decline in inflation in the United States, which can be hampered by forces such as “large fiscal deficits, infrastructure needs, trade restructuring and the remilitarization of the world”.

“The geopolitical situation remains complex and potentially the most dangerous since World War II, although its outcome and effect on the global economy are unknown.“Dimon stressed.

On the positive side, JPMorgan saw investment banking fee revenue rise 50% to $2.304 billion and client investment assets rise 14% to more than $1 trillion, the note said.

JPMorgan kicked off the quarterly earnings season alongside other major banks such as Citigroup, which posted an increase in profits, and Wells Fargo, which posted a slight drop. The other major banks – Bank of America, Goldman Sachs and Morgan Stanley – will follow suit in the coming days.

Big banks have benefited for some time from the Federal Reserve’s interest rate hikes to tame inflation, but the high-interest-rate environment is beginning to show in their accounts, threatening to weaken consumers and weigh down the economy.

Citigroup, which earned $3.217 billion (up 10% year-over-year) and had revenue of $20.139 billion (up 4%), also increased its provision for loan losses in the quarter, by $2.476 billion (up 36%) and saw its investment banking revenue jump 60% to $853 million.

Wells Fargo, which has been restructuring its accounts in recent years, earned US$4.91 billion, down 1% year-on-year, and had revenues of US$20.689 billion (up 1%), and increased its provision for bad debts by US$1.236 billion (down 28%).

At mid-session on the New York Stock Exchange, during a day of general gains following news of a new drop in inflation in July, Wells Fargo fell 5.5%, Citigroup 2% and JPMorgan a moderate 0.70%, in a negative market reaction to the results.