JPMorgan’s profit sinks 42% YoY in fiscal Q1

on Apr 13, 2022
  • JPMorgan blames inflation and the Ukraine war for the hit to net income.
  • CEO Jamie Dimon is optimistic on the economy, at least for the short-term.
  • Shares of JPMorgan Chase opened nearly 4.0% down on Wednesday.

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Shares of JPMorgan Chase & Co (NYSE: JPM) opened nearly 4.0% down on Wednesday after the Wall Street bank reported lower-than-expected net income for its fiscal first quarter.

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Notable figures in JPMorgan’s Q1 earnings report

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  • Net income came in at $8.28 billion in fiscal Q1 or $2.63 per share.  
  • In the same quarter last year, net income stood at $14.3 billion or $4.50 a share.
  • At $30.7 billion, revenue was down about 5.0% on a year-over-year basis.
  • FactSet consensus was for $2.72 of EPS on $30.59 billion in revenue.
  • Investment banking fees tanked 31% while markets revenue was down 3.0%.
  • JPMorgan sees rising demand for commercial banking loans that jumped 2.0% in Q1.

CEO Jamie Dimon blamed inflation and the Ukraine war for the hit to net income. The bank built $902 million of net credit reserve due to a higher probability of downside risk. It benefitted from $5.2 billion of net credit reserve releases. In the earnings press release, CEO Dimon said:

We remain optimistic on the economy, at least for the short term – consumer and business balance sheets as well as consumer spending remain at healthy levels; but see significant geopolitical and economic challenges ahead due to high inflation, supply chain issues and the war in Ukraine.

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According to JPMorgan, its board authorised $30 billion in share repurchase. The bank forecasts a $1.0 billion hit from the Ukraine war over time. Extreme volatility in commodity prices due to the conflict pose another challenge for the big banks.

Despite a 42% hit to profit, Hightower’s Stephanie Link still sees the stock as attractive. On CNBC’s “Squawk Box”, she said:

This stock has massively underperformed since last quarter. I expected a very mixed quarter, but the stock is down 15% year-to-date. It’s trading at 1.5 times book, which is rare for JPMorgan. This stock has traded at north of 2 times book for years.

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