JPMorgan exceeds expectations, easing concerns about an economic slowdown.

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With a beat, JPMorgan Chase began the third quarter earnings season for large banks on Friday, restoring confidence in a sector that had previously been avoided due to concerns about the macroeconomic situation.

Although the bank’s profit decreased from last year’s quarter, it wasn’t as awful as anticipated. JPMorgan (ticker: JPM) outperformed analysts surveyed by FactSet, who predicted earnings of $8.7 billion, or $2.90 per share, by earning $9.7 billion, or $3.12 per share. Even still, earnings decreased 17% from the prior quarter as the bank had to set aside $808 million in reserves and $959 million in losses on securities. Additionally, revenue exceeded forecasts, coming in at $33.5 billion vs. $32.1 billion.

Despite the positive results, Jamie Dimon, CEO of JPMorgan, highlighted that despite the bank’s strength, the economy is still facing significant challenges, such as the effects of the war in Ukraine and the tightening of monetary policy by central banks across the world.

While we always hope for the best, Dimon added, “we are attentive and constantly ready for the worst to happen so we can continue to service clients even in the most trying circumstances.

This week, Dimon warned that the United States would experience a recession within the following six to nine months when speaking at a CNBC conference. Wall Street is unsure how the bank and its competitors will fare in light of this.
The main banks’ earnings have been uneven thus far. The results of Citigroup C +0.81% (C) shocked the upside as the bank continued to make strides in turning around its fortunes. However, Wells Fargo (WFC), which failed earnings estimates despite a 36% gain in net interest income, painted a less rosy image. The weakest performer on Friday was Morgan Stanley (M.S.), which reported a 55% decline in investment banking income yearly amidst a slowdown in deal activity.
Although results have been inconsistent, executives have so far come off as cautious yet unconcerned about the difficult macroeconomic situation, which includes the Federal Reserve hiking interest rates to curb inflation.

Higher interest rates benefit banks by boosting the amount of interest they can charge on loans, but there is a chance that the Fed’s actions might push the economy into a recession, which could trigger a wave of defaults. JPMorgan has so far been spared a lot of that suffering.
Since last year, net interest income has increased 34% to $17.6 billion, reflecting the rising rates. Due to rising loan levels and anticipation of a wave of defaults in the event of a recession, the bank increased its reserves while net charge-offs increased by $203 million to $727 million.
Dimon and others have frequently warned that the economy may be severely harmed by global tensions and the Federal Reserve’s tightening.
In a statement to CNBC this week, Dimon predicted that the S&P 500 SPX -2.09% would drop another 20% and said, “These are very, very serious things that I think are likely to push the U.S. and the world—I mean, Europe is already in recession—and they’re likely to put the U.S. in some kind of recession six to nine months from now.”

Wall Street will closely monitor JPMorgan’s performance and Dimon’s future comments on the macroeconomic environment.
Although banks have had a difficult year, JPMorgan has performed worse than its competitors. Its shares have lost 35% this year, behind the SPDR S&P Bank exchange-traded fund (KBE), which has lost 17% of its value. After the bank released its prior quarterly results, which were poorer than anticipated, and announced the cessation of share repurchases to increase its capital cushion, JPMorgan shares declined.
Next week, when Bank of America (BAC) reports on Monday, and Goldman Sachs Group (G.S.) reports on Tuesday, Wall Street will receive further banking news.

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