JPMorgan profit misses estimates as Ukraine crisis stalls dealmaking

[NEW YORK] JPMorgan Chase reported a lower-than-expected quarterly profit on Wednesday (Apr 13) as dealmaking slowed and the lender started building loan loss reserves in the face of decades-high inflation and the Ukraine crisis.

Investment banking revenue for big banks stalled after the Russian invasion of Ukraine in late February. In the first quarter, the total value of pending and completed deals fell to its lowest since the second quarter of 2020, according to Refinitiv data.

The largest US lender, whose fortunes are often seen as a barometer of the health of the economy, reported a 28 per cent drop in investment banking revenue in the first quarter.

Credit costs swung dramatically to US$1.46 billion as the company added to reserves for loan losses. A year earlier, JPMorgan results benefited from a negative provision of US$4.16 billion when it drew down extra reserves it had built up during the pandemic.

"We remain optimistic on the economy, at least for the short term ... but see significant geopolitical and economic challenges ahead due to high inflation, supply chain issues and the war in Ukraine," chief executive Jamie Dimon said in a statement.

The lender also said its board approved a share buyback plan of US$30 billion.

JPMorgan posted a profit of US$8.28 billion, or US$2.63 per share, in the quarter ended Mar 31, compared with US$14.3 billion, or US$4.50 per share, a year earlier.

Analysts on average had expected earnings of US$2.69 per share, according to Refinitiv. It was not immediately clear if the reported numbers were comparable to estimates.

The big US banks are reporting results at a time when inflation is at its highest in decades, which could lead the Federal Reserve to hike interest rates more aggressively this year.

While that is good for big lenders like JPMorgan, rapid rate hikes could slow down the economy and scupper a nascent recovery from the pandemic.

Net reported revenue fell to US$30.72 billion from US$32.27 billion a year earlier.

Other large US banks including Citigroup, Wells Fargo and Goldman Sachs will report results on Thursday, while Bank of America reports results next Monday. REUTERS