JPMorgan Chase earnings fell 28% ...

JPMorgan Chase earnings fell 28% after building reserves for bad loans, bank suspends buybacks

JPMorgan earnings fell short of analyst expectations as the bank built reserves for bad loans by $428 million.

Shares of the bank fell nearly 5% in trading Thursday, hitting a fresh 52-week low.

Chairman and CEO Jamie Dimon warned geopolitical tension, high inflation and waning consumer confidence could hurt the economy “sometime down the road.”

https://www.cnbc.com/2022/07/14/jpmorgan-jpm-2q-2022-earning…

1 Like

Shares of the bank fell nearly 5% in trading Thursday, hitting a fresh 52-week low.

So basically they’re getting punished for doing exactly what a bank should be doing ahead of what’s likely to be a nasty next couple of years.

1 Like

I am not sure a 5% reduction in price is necessarily a case of being punished.

Personally, I think the price drop has more to do with the halting of stock buybacks than it does a fall in profit.

The fall in profit is largely fictitious. When you set aside money to protect from loan losses, that is not really lost profit until those losses occur.

JPM set aside $428 million for such. If loan loss come in at $200 million, then JPM will be able to book $228 million in profit in some future quarter when they release those reserves. This is a common practice (as quoted below). Savvy investors know this and should not overreact to this largely fictitious drop in profits.

Profit declined 28% from a year earlier to $8.65 billion, or $2.76 a share, driven largely by the reserve build, New York-based JPMorgan said in a statement. A year ago, the bank benefited from a reserve release of $3 billion.

1 Like

Chairman and CEO Jamie Dimon warned geopolitical tension, high inflation and waning consumer confidence could hurt the economy “sometime down the road.”

Dimon is one CEO who is more fully aware of his book. I take that warning as exposure to China. Plus uncertainty about the US mortgage market. The $428 m for bad loans might be next to meaningless.