Something that has been an ugly early hours for global markets became even worse when JPMorgan formally announced Q2 quarterly earnings with outcomes that were not only unfortunate from top to bottom, lacking on both sales and earnings, but a desperate perspective from CEO Jamie Dimon about “never-before-seen” quantifiable toughening and its implications of global cashflow, “coupled with the military conflict in Ukraine and its damaging impact on global fuel and resource prices are very highly probable to truncate global economic growth in the coming years.”
Debit and Credit Spending’s
Notably, debit and credit card spending was “up 15% with travel and eating expenditure being robust” while card loans were “up 16% with new account originations remaining strong.” On the other hand, home lending income decreased by 26%, reflecting the difficulty in mortgage origination that has led to layoffs across the sector.
And continuing with the consumers bank, JPM put aside $761.5 million for problematic loans, but the reserves building – money allocated – totaled $150 billion. Last year at this time, they discharged about $2.1 billion in credit reserves while promoting the customer’s health and vitality. This action reflects the more gloomy outlook on the U.S. economy heard this quarter.
Overall, the outcomes were favourable. The bad news is that Dimon obviously understands the end of the good times, and after unexpectedly building reserves by $806.7 million steadily for the past quarter, the bank added another $428.5 million in reserves in Q2 due to “a modest deterioration in the overall economy,” along with taking $656 billion in missed payments (less than the 838 million expected), totaling $1.12 billion in borrowing costs, possibly a bit more than the $1.08 billion anticipated.
It is perplexing how JPM can observe a gain in NIM when all slopes are inversion, but we are certain that someone will inquire about this on the call.
Weak Earnings of JP Morgan
Vital Knowledge’s Adam Crisafulli is the first to respond to the weak earnings by stating that “the actual Q2 numbers themselves are decent – the EPS “miss” was largely driven by certain one-time goods within in the investment company (loan guarantee obligations, Russia-related objects, etc.), while expenditures and NII/NIM were bright spots.” Regarding the buyback restriction: “The biggest negative is the repurchase suspension – management believes this will be transitory (and capital requirements improved compared to Q1), but shareholders will still be dissatisfied.”
Meanwhile, Octavio Marenzi of Opimas writes that the results were “a mixed bag, but ultimately quite disappointing,” and that “there was no concrete plan for the institution world in general, and this will continue for another two quarters.” Investors concur, and judged by the premarket decline in JPM stock price, they do not like what they see, pushing the stock price down by as much as 5 percent.