JPMorgan Chase, the largest bank in the United States, earned 8,649 million dollars (8,606 million euros at current exchange rates) from April to June, 28% less than in the same period the last year, but slightly above first quarter profits (8,300 million). The entity reported a provision of funds to cover credit losses in the amount of 1,100 million euros. The results fell short of analysts’ expectations and its shares fell more than 4% on Thursday, dragging the overall index lower, with the S&P 500 losing nearly 1%. The entity has decided to temporarily suspend the buyback of its own shares to strengthen its capital while its CEO, Jamie Dimonsaid in a statement to be “aware of the economic uncertainties” to come.
For its part, the income of the investment bank Morgan Stanley 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 decrease of 32%. compared to the same period last year. Morgan Stanley shares fell 23% in the first six months of the year, their worst performance for two consecutive quarters in more than a decade, according to Bloomberg.
The investment banking group posted the worst results, while the business unit helped offset the loss, as fixed income revenues rose amid heightened volatility and customers rushed to reposition their accounts. .
However, unlike JPMorgan, Morgan Stanley announced a new share buyback, up to 20,000 million shares of the company, but without giving details on when. Redemptions have raised issues with regulators in the past, due to the possibility that in times of economic turmoil the use of cash for the transaction could deplete the capital originally intended to cover credit losses.
Slowing demand and crashing markets have ended a period of record profits for the nation’s biggest banks, but that doesn’t mean a recession is imminent, top bankers say, even as they are showing signs of slowing down to prepare for such an eventuality. For JPMorgan executives, there are few, if any, signs that the US economy is sliding into recession. “We looked at our actual data very carefully,” Jeremy Barnum, the bank’s chief financial officer, said in a call with reporters picked up by The New York Times. “There is essentially no evidence of any real weakness.”
Retail banking customers continue to spend on goods and services they want but don’t need, such as travel and restaurants, and the businesses JPMorgan lends to are using certain lines of credit more, two signs that economic activity, so far, has managed to maintain its traction despite the general rise in prices.
The rise in inflation, which reached 9.1% in June, and the Federal Reserve’s efforts to help combat it have alerted investors to the possibility of a recession and the indirect effect an economic contraction for financial institutions. Expectations that the Fed will raise interest rates by 100 basis points at the end of July add to the concern.