Powerful forces threaten US economy, claims JPMorgan CEO
4 Min Read
The United States is only proving to have affected itself with the sanctions it imposed on Russia, for their ramifications have taken onto the US banking sector after they took a toll on the oil sector and the livelihoods of average Americans.
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JP Morgan CEO Jamie Dimon speaks at the Boston College Chief Executives Club in Boston, Massachusetts, US, November 23, 2021 (Reuters)
JPMorgan Chase's days of making a profit from the pandemic are over, for the largest bank in the United States has been sharply declining, with the firm losing 3.28% of its stock value.
CEO Jamie Dimon, despite the purchasing power of Americans tanking to historic lows, claimed the US economy was growing, citing growth in card spending, low delinquencies, and "healthy" household and consumer balance, though facts on the ground reflect a different reality.
The bank set aside $900 million in fresh funds in preparation for economic turmoil after it freed $5.2 billion for potential loan losses in the early months of the pandemic.
The $900 million are to help keep the bank afloat in case the US economy goes into recession, though Dimon said the risks were not that imminent, but US inflation shooting up to its highest in four decades, exacerbated by the Ukraine crisis, has the banking sector and Wall Street altogether blaring their sirens fearing a crash.
"Those are very powerful forces, and those things are going to collide at one point," Dimon told The Washington Post. "No one knows what’s going to turn out."
Commenting on the potential recession, the billionaire said it was possible, though it was far from the bay.
JPMorgan Chase recorded profits 42% less than last year, making $8.28 billion in the first quarter, with revenue decreasing 5% to $30.72 billion, though it still overcame projections ($30.59) analysts drew up.
The aforementioned consumer spending on credit cards increased by 29%, and consumers started carrying more debt, with credit card loans increasing by 15%.
All in all, figures provided by Dimon did, indeed, show a healthy economy, as per his description, but a sharp decline in the volume of initial public offerings decreased revenue by 7% and profit by 26% in the corporation's corporate and investment bank.
The bank also took a hit with $524 million in losses linked to the bank's commodities and the sanctions imposed on Russia, which included $120 million in trading losses related to nickel.
Investment baking fees dipped 31%, with equity underwriting plummeting 76%, marking its worst quarter in the better half of a decade.
Year-on-year trading revenue fell 3% when corporate debt sales, IPOs, and individual investors gave a boost to the stock market.
With the US implementing its bid to reduce surging inflation with the Fed spearheading stricter policies, Dimon said markets will get much worse in the coming months.
The US central bank embarking on a path toward stricter monetary policies has already taken its toll on the Japanese yen, which sank to its lowest in two decades. Earlier on Wednesday, the Japanese currency, seen as a safe haven by many due to its immunity to volatility, fell to 126 on the dollar.
The banking body had raised interest rates last month, and it is expected to embark on this path throughout 2022, which would be highly beneficial for banks.
Lending will turn more of a profit because it would allow banks to charge more on loans, a reflection of the leverage banks will practice over citizens. JPMorgan Chase's net interest margin rose by 0.04% at the end of December, reaching a high of 1.67%.
The profits the banking sector has been making and the losses Americans have been suffering are pushed by the US sanctions on Russia over the war in Ukraine, which quickly impacted the purchasing power of the average American and small businesses.
The status-quo and the US sanctions on Russia have weakened US citizens' purchasing power, causing fuel prices to soar in the country with US oil prices reaching their all-time high following a ban on Russian fuel exports.
