JPMorgan Chase’s profits soared, but Jamie Dimon warns inflation and interest rates may stay high.

(VOR News) – Even though JPMorgan Chase had yet another excellent quarter, Jamie Dimon, the bank’s chief executive officer, emphasized the risks that the organization is still worried about.

In its earnings report for the second quarter, which was released on Friday, the largest bank in the United States by assets reported net income of $18.1 billion, or $6.12 per share.

Comparing this to the $14.5 billion reported for the same period last year, there has been a 25% increase. According to FactSet, Wall Street analysts projected a $17.3 billion profit, or $5.88 earnings per share.

Based on data compiled by FactSet, the corporation generated $50.2 billion in revenue in the three months that concluded on June 30.

Analysts had predicted $42.23 billion for JPMorgan.

The performance of the global bank was noted to have significantly improved on a number of platforms. Its investment banking fees surged by fifty percent, and its market share rose to nine percent. Moreover, it benefited from an increase in Visa share value of $7.9 billion.

CEO Dimon stressed the need to exercise caution while dealing with geopolitical and macroeconomic problems, despite the favorable outcomes.

“Market valuations and credit spreads appear to indicate a relatively stable economic outlook, but we remain cautious regarding potential downside risks,” stated the financial statement. The tail risks are the same ones we have already discussed and will discuss once more.

Though the geopolitical situation is undoubtedly the most perplexing and potentially deadly since World War II, it is still difficult to anticipate what will happen and how it will impact the global economy.

After that, he said, “there has been some progress in bringing down inflation, but there are still multiple inflationary forces ahead of us, including large fiscal deficits, the need for infrastructure, trade restructuring, and global remilitarization.”

As a result, it’s probable that inflation and interest rates would rise faster than what the market anticipates. The complete effect that quantitative tightening will have on this scale is still unknown.

JPMorgan’s stock decreased one percent in premarket trade on Friday.

Interest rates seem to be stuck in the 5.25–5.5% range for at least a few more months as the central bank waits to implement what is probably going to be its last rate decrease of the year.

This begs the question of whether the massive banking institution can sustain higher rates for extended periods of time. According to JPMorgan, their net interest income climbed by 4% over the course of the previous year, totaling $22.9 billion.

With $3.7 trillion in assets under administration as of June 30th, up 15% from the previous year, this bank has continued to distance itself from other major US banks.

With $49.6 billion in earnings the year before, which included a $4.1 billion gain from the acquisition of First Republic Bank, which filed for bankruptcy in May 2023, it was its most prosperous year ever.

This quarter, JPMorgan is releasing its full earnings report without disclosing First Republic’s contributions to its balance sheet. The reason for this is that the business’s profits now match those from the prior year.

JPMorgan stated late last month that it would increase the quarterly dividend on common shares from $1.15 per share to $1.25 per share for the third quarter of 2024.

This increment took effect right away. On July 1, a new program established by the board of directors to repurchase common shares valued at a total of thirty billion dollars went into effect.

According to Dimon, JPMorgan’s “strong financial performance and represents a sustainable level of dividends” was what made the dividend hike acceptable.

The bank claims that because of its 15.3% capital ratio, it is able to safeguard itself against any future capital requirements that might be implemented by the middle of 2025.

JPMorgan issued a warning, citing the results of the annual bank stress test, that it would suffer losses considerably greater than those that the Federal Reserve had already shown. This would result in the capital ratio requirement that banks must maintain, which is now 11.9%, “probably being slightly higher” at 12.3%.

SOURCE: QZ

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