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WSJ: JPMorgan's Dimon Warns Economy Likely to Worsen

WSJ: JPMorgan's Dimon Warns Economy Likely to Worsen
JPMorgan Chase & Co. Chairman and CEO James Dimon (Getty Images)

By    |   Thursday, 14 January 2016 12:03 PM

JPMorgan Chase & Co. Chairman and CEO James Dimon warned that the U.S. economy is likely to worsen after years of growth.

On a call with analysts after the bank announced earnings, The Wall Street Journal said Dimon discussed whether the U.S. economy has more strong days ahead.

“It’s as good as it’s ever been,” Dimon said on the call. “Obviously it’s going to get a little bit worse,” WSJ.com reported.

Dimon cited 2% to 2.5% growth for the last five years, roughly 5 million added jobs, and boosts in household formation, car sales and wages.

Dimon explained the market is adjusting to fears about China’s economy and a commodity-price plunge. “Hopefully this will all settle down and is not the beginning of something really bad,” he added. "We're not forecasting a recession. We think the U.S. economy looks pretty good at this point."

The biggest U.S. bank by assets ended the year with a better-than-expected quarterly profit and expressed confidence about its businesses in 2016 despite a grim start for stocks and energy prices, Reuters reported.

The bank — the first big lender to report results since the Federal Reserve raised its key interest rate in mid-December — said on Thursday it expected net interest income to rise by about $2 billion as a result of the hike and loan growth.

The New York-based lender forecast incremental increases in the amount of money set aside for energy-related losses in the coming year, but said oil prices would need to remain at current levels for an extended period for provisions to be significant.

The bank's shares rose as much as 3.5 percent in morning trading. Other bank shares also rose, as investors took JPMorgan's results and positive noises about the U.S. economy as indicators of the health of the sector.

U.S. banks, like their global counterparts, have had a tough year as falling oil prices and worries about slowing growth in China contributed to weakness in credit markets.

Legal charges and the costs of meeting stricter capital requirements have also weighed on the lenders. And U.S. interest rates remain near historic lows even after the Fed rate hike.

That has meant that cost cutting — the one thing banks can best control — has become a main driver of profits.

Two of the bank's five businesses reported a rise in profit — investment banking by 80 percent and consumer and community banking, the largest contributor to net income, by 10 percent.

Income from commercial banking fell 21 percent.

JPMorgan's total non-interest expenses fell 7.4 percent to $14.26 billion in the quarter, while legal expenses fell to $644 million from $1.1 billion.

"We are very happy with our expense story for the year," Chief Financial Officer Marianne Lake said on a call with reporters.

Total compensation expenses fell 2.4 percent to $6.69 billion as the bank's employee count fell to 234,598, from 241,359 at the end of 2014.

RECORD ANNUAL EARNINGS

JPMorgan's net income rose 10.2 percent to $5.43 billion, boosting annual profit to a record $24.44 billion.

On a per-share basis, the bank earned $1.32, handsomely beating the average analyst estimate of $1.25 per share.

Total net revenue rose about 1 percent to $23.75 billion, topping the average estimate of $22.89 billion.

Revenue from fixed-income trading, usually JPMorgan's most volatile business, fell 3 percent to $2.57 billion.

The bank's balance sheet shrank 2.7 percent on a sequential basis to $2.35 trillion as of the end of December.

Like other big banks, JPMorgan has been shedding assets to appease regulators, who fear its size could pose a risk to the financial system in the event of a failure.

Provision for bad loans rose 49 percent to $1.25 billion.

JPMorgan's shares were trading at $58.33 in late morning trading. The stock was the only one among the six big U.S. banks to finish 2015 in positive territory, rising 5.5 percent.

But through Wednesday the shares had fallen 13.2 percent this year, the second worst performer in the Dow Jones industrial average.

(Newsmax wire services contributed to this report).

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Economy
JPMorgan Chase & Co. Chairman and CEO James Dimon warned that the U.S. economy is likely to worsen after years of growth.
jpmorgan, dimon, economy, earnings
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2016-03-14
Thursday, 14 January 2016 12:03 PM
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