When it involves banking, JPMorgan Chase’s Chief Executive Jamie Dimon is arguably probably the most intently watched and influential.
He helms the most important U.S. financial institution and the fifth largest on the earth, with $3.9 trillion of property. JPMorgan has a fortress-like steadiness sheet, together with $514 billion of loss-absorbing capability and $1.4 trillion in money and marketable securities.
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Dimon, 67, has made his identify steering a number of banks by way of robust occasions and benefiting from alternatives as they come up. For instance, when First Republic Bank collapsed final spring, Dimon and JPMorgan swept in, selecting up the financial institution and its rich clients on a budget. Bank analysts have fawned over him for years.
His repute and affect as a banker-statesman makes it sensible to concentrate to what he says about banking, economics, and geopolitics.
Dimon weighs in on JPMorgan’s earnings
The massive information Friday for Dimon and JPMorgan (JPM) – Get Free Report was the financial institution’s fourth-quarter earnings report.
The quarterly outcomes provided Dimon a chance to weigh in on JPMorgan’s efficiency, challenges dealing with the banking business, and financial dangers.
Overall, JPMorgan’s income and revenue have been stable.
It registered revenue of $9.3 billion within the quarter, or $3.04 a share, down 15% from $11 billion, or $3.57 a 12 months in the past.
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However, the outcomes would have been higher with out a $2.9 billion particular evaluation fee to the Federal Deposit Insurance Corporation, the company that protects financial institution depositors towards losses when banks go underneath.
The FDIC’s evaluation is designed to replenish its reserves following the failure of First Republic, Silicon Valley Bank, and Signature Bank final spring.
Those banks have been shuttered after they ran shy of liquid property to cowl withdrawals, partly as a result of the worth of bonds held on their steadiness sheet dropped due to the Federal Reserve’s will increase to the Fed Funds Rate to combat inflation.
JPMorgan’s share of the evaluation took a hefty 74 cents off its per-share revenue, inflicting it to overlook analysts’ forecasts on a GAAP-accounting foundation.
On the optimistic facet, JPMorgan’s income climbed 8.4% to $38.3 billion, although that too trailed analysts’ estimate of $39.8 billion.
Much of the income enhance stemmed from web curiosity earnings, which soared 19% to a report $24.2 billion amid excessive rates of interest. Net curiosity earnings represents the curiosity funds a financial institution receives on its loans and bonds minus the curiosity funds it makes to depositors.
On the destructive facet, JPMorgan’s merger exercise dropped 18% final 12 months from 2022 to $3 trillion in offers accomplished, the bottom in 10 years, in response to LSEG knowledge.
Not surprisingly, Dimon sees the earnings glass as half-full.
“We ended the year with a solid quarter,” he mentioned. “Our record results in 2023 reflect over-earning [higher than normal numbers] on both net interest income and credit [lending]. But we remain confident in our ability to continue to deliver very healthy returns even after they normalize.”
Dimon warns about coverage and the economic system
However, Dimon’s not too blissful about regulatory and legislative proposals within the U.S. and abroad which can be designed to make banks much less dangerous, together with Basel III.
“These proposals could cause serious harm to consumers, businesses, and markets,” said Dimon bluntly.
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Dimon says that as these proposals are currently written, they risk “inflicting undue penalties for finish customers.”
He also warned those in the economic soft-landing camp not to get too confident.
“The U.S. economy continues to be resilient, with consumers still spending, and markets currently expect a soft landing,” said Dimon. “It is necessary to notice that the economic system is being fueled by massive quantities of presidency deficit spending and previous stimulus.”
And much more spending is required for the transition to wash vitality, the restructuring of worldwide provide chains, protection and healthcare, he mentioned. “This may lead inflation to be stickier and rates to be higher than markets expect.”
The Federal Reserve’s fee cuts and quantitative tightening (promoting bonds to shrink its steadiness sheet) are wringing a few of that stimulus out of the system, however there’s nonetheless some huge cash sloshing round, particularly concerning authorities spending associated to the Infrastructure Act and CHIPS Act, and we do not actually understand how quantitative tightening will play out.
“Quantitative tightening (QT) is draining over $900 billion of liquidity from the [financial]system yearly, and we’ve by no means seen a full cycle of tightening,” Dimon mentioned.
Geopolitical threat stays a possible black swan that should not be ignored, both.
“The wars in Ukraine and the Middle East have the potential to disrupt energy and food markets, migration, and military and economic relationships, in addition to their dreadful human cost,” Dimon mentioned. “These significant and somewhat unprecedented forces cause us to remain cautious.”
The creator owns shares of JPMorgan.