By
Godfrey Benjamin
April 17th, 2024
According to JPMorgan, its Q2 2022 results fell below Wall Street’s expectations in EPS and revenue because of bad loan reserves.
JPMorgan has finally released its Q2 2022 earnings report showing earnings per share and revenue estimates below analysts’ expectations. The New York-based banking giant ascribes the below-par performance to its $428 million bad loans reserve. This amounts to a 28% year-over-year profit decline to $8.65 billion, or $2.76 a share. In 2021, JP Morgan benefited from a reserve release of $3 billion.
JPMorgan’s earnings per share for Q2 2022 was $2.76 a share versus the general consensus estimate of $2.88. In addition, the leading bank’s revenue haul for the same period came in at $31.63 billion, compared to the $31.95 billion analysts expected. However, revenue realized for the second quarter represents a 1% YoY increase as JPMorgan benefited from higher interest rates.
JPMorgan’s shares are currently down 29% since the start of the year, and at a 35.30% drawdown from its 52-week high of $172.96.
Commenting on JPMorgan’s share outlook, company CEO Jamie Dimon stated that the banking powerhouse opted to suspend all share repurchases for now. Dimon explained that this is necessary to hit regulatory capital requirements.
JPMorgan Q2 2022 Report Seen as Strong Indicator of Things to Come in Mainstream Financial Sector
Observers continue to pay close attention and take cues from the bank’s latest performance report. The report is important, especially since it is coming during a particularly trying phase in the financial landscape. Although favorable optics like low unemployment, rising interest rates, and market volatility posit to be a boon, there is a lot of talk about a looming recession. In fact, analysts have already begun slashing estimates in the general sector. Speaking about the conflicting market situation, Morgan offered:
“In our global economy, we are dealing with two conflicting factors, operating on different timetables. The U.S. economy continues to grow and both the job market and consumer spending, and their ability to spend, remain healthy.”
However, the JPMorgan CEO also explained:
“But geopolitical tension, high inflation, waning consumer confidence, the uncertainty about [the limit of rates trajectory] and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its [far-reaching] harmful effect are very likely to have negative consequences on the global economy sometime down the road.”
Meanwhile, company downgrades continue to rise in intensity as profit outlook remains bleak. Most big banks have their stocks at a sustained low ebb, coupled with a sharp decline in capital market revenue. The same also goes for revenue from mortgages across the board. In addition, notable firms such as Bank of America and Citigroup continue to get flagged for potential losses.
JPMorgan was one of the first banks to begin setting aside funds for loan losses, doing so in April. The bank ended up booking a $902 million charge for building credit reserves in the quarter. This was also in line with Dimon’s recent cautious forecast on incoming economic turmoil.