Market instability caused by Russia’s invasion of Ukraine is behind JPMorgan Chase & Co (NYSE:JPM)’s disappointing first-quarter earnings disclosure. Inflation and supply chain issues also played a role as the bank reported losses and a sharp drop in profit.
JPMorgan’s Q1 Report
As informed by CNBC, JPMorgan’s profit dropped by 42% from a year earlier to $8.28 billion —$2.63 a share. Revenue dropped by 5% from the same quarter last year to $31.59 billion and above the $30.86 billion estimates.
Q1 2022 hedge fund letters, conferences and more
Adjusted earnings were $2.76 a share against a $2.69 estimate, excluding a 13-cent hit related to the war in Ukraine. Upon the release of the earnings report, the bank’s shares dived by 3.2% in premarket trading.
CEO Jamie Dimon said he sees “significant geopolitical and economic challenges ahead due to high inflation, supply chain issues, and the war in Ukraine.”
His outlook stands in stark contrast to that of a year ago when he expected the economy to gain momentum and expand, as the government released billions of dollars on loan loss reserves to offer lenders partial risk coverage.
“JPMorgan said it took a $902 million charge for building credit reserves for anticipated loan losses, compared to a $5.2 billion release a year earlier,” CNBC reports.
An Eventful First Quarter
“Higher probabilities of downside risk” in the U.S. economy prompted Dimon to build up credit reserves, given skyrocketing prices and the effects of Russia’s invasion of its neighbor.
He said, “We remain optimistic on the economy, at least for the short term —consumer and business balance sheets as well as consumer spending remain at healthy levels— but see significant geopolitical and economic challenges ahead due to high inflation, supply chain issues, and the war in Ukraine.”
JPMorgan’s performance is a key indicator of how Wall Street coped with an eventful Q1, as those companies that weathered the storm could exceed expectations since analysts are curving their estimates.
Troy Rohrbaugh, JPMorgan’s global markets chief, said during the March 8 conference: “The markets are extremely treacherous at the moment; there’s a lot of uncertainty. The full ramifications of the current conditions are still uncertain.”