JPMorgan Chase (JPM) Latest Earnings Highlights and Takeaways

Reports:

• Revenue of $31.6 billion was up $235 million or 1% year-on-year.
• Noninterest expense was $18.7 billion, up 6%, driven by technology, marketing, and higher compensation.
• Net income was $8.6 billion, down 28%, driven by a net credit reserve build of $428 million compared to a net release of $3.0 billion in the prior year.
• In Consumer & Community Banking, combined debit and credit card spending was up 15% with travel and dining spending remaining robust.
• Global IB fees were down 54% compared to a record last year, in a challenging macro environment.
• “The U.S. economy continues to grow and both the job market and consumer spending, and their ability to spend, remain healthy. ”
• “Geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go, and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices are very likely to have negative consequences on the global economy sometime down the road. ”

Q & A

Are you starting to see any initial cracks in credit or strains in the system?

“Look, I think the short answer to that question is no, certainly not in any of our reported actual results for this quarter.”

“Obviously, running still well below normal levels from the pre-pandemic period. But if you really want to kind of turn up the magnification of the microscope and look really, really, really closely, if you look at cash buffers in the lower income segments and early delinquency roll rates in those segments, you can maybe see a little bit of an early warning signal to the effect that the burn down of excess cash is a little bit faster there.”

“But I think there’s really still a big question about whether that’s simply normalization or whether it’s actually an early warning sign of deterioration.”

Why did Jamie Dimon say “hurricane” is on the horizon while holding the previous $77 billion expense guidance for 2022? (Why does JP Morgan plan to spend same amount of money if revenue is decreasing?)

“Consumers are in good shape. They’re spending money. They have more income. Jobs are plentiful. They’re spending 10% more than last year, almost 30% plus more than pre-COVID. Businesses, you talk to them, they’re in good shape.”

“the way I look at it a little bit in 15 years, the global GDP — or 20 years, the global GDP, global financial assets, global companies, companies over 5 — a billion dollars’ worth will all double. That’s what we’re building for. We’re not building for like 18 months.”

“I like the fact that jobs are plentiful. I think that’s good for the average American, and we should applaud that. And so they’re in good shape right now.”

Key Takeaway

• US economy is doing fine right now, and the recession probably won’t come anytime sooner than in 3 months.
• The recession won’t come until there is fewer job opening than job applicants.
• Key metrics to monitor: job market, consumer spending, inflation, consumer confidence, fed rates, global liquidity, and commodity price.