JPMorgan Chase reports lower profits, gives cautious economic outlook

NEW YORK, United States - JPMorgan Chase reported a drop in second-quarter profits and warned that a weakening global economic outlook prompted the firm to set aside additional funds to cover potential bad loans.

Executives sketched out a complex economic picture, with US households still relatively well off in terms of savings, a strong job market and robust consumer spending.

But headwinds -- including high inflation, geopolitical uncertainty and fast-changing Federal Reserve policy to sharply curtail liquidity and raise interest rates -- "are very likely to have negative consequences on the global economy sometime down the road," said Chief Executive Jamie Dimon in a statement.

While consumers are "in very good shape," there are "a serious set of issues" that threaten the outlook, Dimon told reporters on a conference call.

These include the worry that Russia will cut off Germany's natural gas supply and the possibility the Federal Reserve's aggressive plan may not be sufficient to rein in inflation.

"The markets will be volatile," Dimon predicted. "You can't have all these kind of things going on and not have volatile markets."

Global equities have been under pressure throughout 2022 as economists increasingly highlight rising recession risks, although some believe any downturn would be relatively mild.

The big US bank posted earnings of $8.6 billion for the second quarter, down 28 percent from the same three months of last year, in results that missed analyst expectations.

Revenues were $30.7 billion, up one percent.

The bank said it added $428 million in credit reserves due to a "modest deterioration in the economic outlook." In the year-ago period, JPMorgan's profits were boosted by a $3 billion release in reserves.

Dimon said even in the case of a recession, JPMorgan would need to hold "a lot less" in reserves compared with the $15 billion it set aside early in Covid-19. 

The bank experienced $657 million in charge-offs for bad loans in the second quarter, up only modestly from the level in the previous quarter.

JPMorgan enjoyed a boost from higher net interest income following Fed interest rate increases. But the bank also incurred higher expenses on salaries, technology and marketing.

The bank temporarily suspended share buybacks to meet new federal stress test requirements for managing risk assets, Dimon said.

Consumers still spending 

The results came as the Labor Department this week reported another large spike in wholesale and consumer prices, which are the heart of investor fears about the consumer-driven US economy.

But JPMorgan Chief Financial Officer Jeremy Barnum said "there's essentially no evidence" at this point of a drop-off in consumption.

The bank's credit card data confirms that consumers are spending more on food and gasoline, but that they are still also spending on travel and dining.

"That indicates to us that consumers still don't feel so pinched by inflation that they're cutting back on discretionary spending, and that's a relatively positive sign," Barnum said.

Persistently high inflation has also raised fears that the Fed will adopt an even tougher line on monetary policy after the central bank announced a 0.75-percentage-point hike, its biggest since 1994.

The latest inflation readings have prompted talk of a potential for full point rate increase at the policy meeting later this month -- one that Fed Governor Christopher Waller said Thursday he could support if coming data show no signs of a slowdown.

Dimon said there is evidence of the hit from the Fed shift, but the impacts could worsen if the US central bank is unable to slow the economy with a "soft landing," Dimon said.

JPMorgan shares finished down 3.5 percent to $108.00.

The suspension of share buybacks is "spooking" investors, said Briefing.com, calling it "a signal that management feels the need to be cautious with its money."

Agence France-Presse

JPMorgan Chase asks some managers to return to the office

NEW YORK - JPMorgan Chase, the largest US bank, has asked the heads of its sales and trading units to return to the office by September 21, a person familiar with the plans said Thursday.

The announcement was made during a telephone conference call with the team leaders of those units, many of whom have already returned to the bank's downtown offices, the source told AFP.

JPMorgan Chase CEO Jamie Dimon has spent most of the summer in the New York City office.

The bank's request however is addressed to the heads of these divisions, not to all employees.

JPMorgan plans to be flexible with people who have to manage childcare problems, as many area schools have moved partially or entirely to online courses.

They also will be flexible with employees who are at high risk of exposure to the novel coronavirus, or live with someone at high risk.

JPMorgan plans to monitor the pandemic in each city and location where it operates and adjust to changing circumstances.

The bank believes that having these employees in the office strengthens culture, creates a more cohesive work environment and is important for training newcomers.

Contacted by AFP, JPMorgan Chase declined to comment on the changes, first reported by the Wall Street Journal.

The activities of JPMorgan, as well as all of Wall Street's major financial institutions, were seriously disrupted earlier in the year when the Covid-19 pandemic began to spread, especially affecting New York City.

Many employees opted for teleworking while others have been relocated to emergency sites.

This did not prevent the Wall Street giant from posting record profits in the second quarter of 2020 thanks especially to brokerage and investment banking activities.

Agence France-Presse

JPMorgan drops terms 'master,' 'slave' from internal tech code and materials

NEW YORK -- JPMorgan Chase & Co is eliminating terms like "blacklist," "master" and "slave" from its internal technology materials and code as it seeks to address racism within the company, said two sources with knowledge of the move.

The terms had appeared in some of the bank's technology policies, standards and control procedures, as well in the programming code that runs some of its processes, one of the sources said.

Other companies like Twitter Inc and GitHub Inc adopted similar changes, prompted by the renewed spotlight on racism after the death of George Floyd, a Black man who died in police custody in Minneapolis in May.

The phrases "master" and "slave" code or drive are used in some programming languages and computer hardware to describe one part of a device or process that controls another.

"Blacklist" is used to describe items that are automatically denied, like a list of websites forbidden by a company's cybersecurity division.

"Whitelist" means the opposite - a list of items automatically approved.

Floyd's death has sparked a re-examination of words that might carry racial overtones. For example, some realtors are no longer using the term "master bedroom," and Universal Music Group's Republic Records stopped using the word "urban" to describe music genres and internal departments or roles.

JPMorgan appears to be the first in the financial sector to remove most references to these racially problematic phrases, and it comes after the bank has said it is taking other steps to promote Black professionals and anti-bias culture training for staff.

Columbia Business School programming professor Mattan Griffel said such terms have long been controversial and can be difficult to change.

The technology that underpins bank operations is often a spaghetti-like mess that results from merged companies, decades-old code and third-party systems, and any change can have cascading effects that are difficult to predict, Griffel said.

Changing these terms within the bank's code could take millions of dollars and months of work, Griffel said. "This is not a trivial" investment by the bank, Griffel said. "This kind of language and terminology is so entrenched. It has to (change) and now is as good a time as any."

-reuters-

JPMorgan CEO Dimon calls 'bad recession', mulls suspending 2020 dividend

JPMorgan Chase & Co's top boss Jamie Dimon on Monday said he sees a "bad recession" in 2020, and that the largest US bank could suspend its dividend if the coronavirus crisis deepens.

Dimon, widely regarded as the face of the US banking sector, is the most prominent voice on Wall Street so far to project that the economic cost of the coronavirus will not evaporate quickly, and said the bank's earnings will be down "meaningfully in 2020."

JPMorgan could look at suspending dividends if the gross domestic product (GDP) were to fall by as much as 35 percent in the second quarter and the unemployment rate were to rise further to 14% in the fourth quarter of the year, the chief executive officer wrote in his annual letter to shareholders.

Questions are mounting about whether big US banks will have to cut dividends later this year as the coronavirus crisis puts a record portion of Americans out of work, making it difficult for borrowers to pay back loans.

"If the board suspended the dividend, it would be out of extreme prudence and based upon continued uncertainty over what the next few years will bring," Dimon said.

Dimon, who returned to work last week after undergoing emergency heart surgery in March, highlighted several other challenges that the bank is facing, saying its call centers have struggled in the current environment, with many of them effectively shutting down due to local restrictions.

JPMorgan will extend benefits to customers hit hard by the health crisis, by introducing measures such as waivers for late fees and a 90-day grace period for mortgage and auto loan payments, according to the letter.

Dimon also said that the vast majority of the bank's 16,850 ATMs were "well-stocked and still functioning" to provide cash for customers.

RELIEF MEASURES

The bank said it had extended about $950 million in new loans to small businesses and would still extend credit to small businesses.

"In both our central case scenario for 2020 results and in our extremely adverse scenario, we are lending – currently or plan to do so – an additional $150 billion for our clients' needs," Dimon said.

Even with that lending, Dimon wrote JPMorgan currently has over $500 billion in total liquid assets and $300 billion in incremental borrowing capacity from the Federal Reserve and Federal Home Loan Banks.

Dimon did not pass up the opportunity to suggest regulatory and fiscal policy reform, as he has often done in past annual letters.

"After the crisis subsides (and it will), our country should thoroughly review all aspects of our preparedness and response. And we should use the opportunity to closely review the economic response and determine whether any additional regulatory changes are warranted to improve our financial and economic system. There will be a time and place for that – but not now."

JPMorgan will also nominate former International Business Machines Corp Chief Executive Officer Virginia "Ginni" Rometty for election to its board. Rometty will become the executive chairman of IBM on April 6. (Reporting by Anirban Sen in Bangalore; Editing by Sriraj Kalluvila, Bernard Orr)

-Reuters-

10 years after meltdown, US banks may have already seen biggest gains

Ten years after JPMorgan bought failing investment bank Bear Stearns, one of the first big harbingers of the financial crisis, investor views on US banks are significantly brighter, although the sector may have already put its biggest gains behind it.

JPMorgan initially announced its bid of $2 per share for Bear Stearns on March 16, 2008 when the Wall Street bank was on the brink of collapse due to its exposure to toxic mortgage bonds and a draining of its cash reserves after customers fled as the subprime mortgage crisis intensified.

Fast forward ten years and US bank balance sheets are much healthier as post-crisis regulations such as the Dodd-Frank Act of 2010 forced banks to be more transparent and led them to shore up reserves and make less risky bets.

The S&P 500 bank stock index shows gains for 6 of the last 10 years, including 20 percent gains in each of the last 2 years, as investors piled in for a piece of the profit expansion they expected from tax reform, rising interest rates and deregulation.

But now some analysts and investors are questioning how much further the sector can rise as they watch loan growth, rising credit losses and worry about an acceleration in the pace of Federal Reserve interest rate hikes.

"There's a lot priced into the banks at this point," said Jeff Morris, head of US equities at Aberdeen Standard Investments in Boston citing bets on tax reform, deregulation and up to 3 US interest rate hikes in 2018.

"To propel the bank stocks from here you need more of the same. You need additional signs of regulatory reform. You'd also need to see higher interest rates and more in the way of loan growth," said Morris. "In loan growth we haven't seen much acceleration since the tax plan and the banks themselves aren't talking about seeing a real acceleration in loan growth."

Bank loans and leases grew 3.2 percent in 2017 compared with a 6.5 percent rise in 2016 and the growth rate had dipped to 2.7 percent by February, according to the Federal Reserve data.

JPMorgan has come the furthest of the S&P bank stock index constituents with a price increase of 215 percent since March 14, the last trading day before its Bear deal was announced.

Its shares are now trading at 12.7 times forward estimates compared with 12.5 for the broader bank sector and 17 for the benchmark US S&P 500 stock index. In comparison JPMorgan's price earnings ration was 10.7 around the time of the Bear deal while the sector was valued at 12.3 and the S&P 500 had a multiple of 13.

Charles Peabody, analyst at Compass Point Research & Trading expects loan growth to pick up in 2018, but he is less convinced about credit cost trends.

Credit costs have been low as banks became cautious about underwriting loans after the financial crisis, resulting in lower loan losses, but as the government eyes looser regulations and banks relax lending standards, Morris sees credit losses rising.

"We don't see any particular credit crisis coming up," he said but predicted that losses would "pick up over the next several years to get back to a more normal level."

Since consumer credit costs started to rise albeit gradually, in 2017, Compass Point's Peabody now expects costs from corporate loans to also reach an inflection point in 2018.

"People are being overly optimistic in earnings estimates because they've not factored in higher costs for credit going forward," he said. "I expect loan loss provisions for the big banks to double from current levels between now and at some point in 2019."

Wall Street analysts expect S&P 500 index banks to report 26 percent earnings growth for 2018, compared with 12.3 percent for 2017, according to Thomson Reuters data, but Peabody is skeptical.

"The banks stocks will start to underperform at some point in the second half this year as people's optimism is not realized," he said.

Rising interest rates are also putting bank investors on edge. While rate increases tend to boost profits as banks can charge more for loans, if the rise is too steep it could dampen demand for mortgages or home refinancing loans.

"The easy gains are behind us," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey. "In banks, rising rates are a positive and a negative. Right now it's a positive but at some point the negative aspects will come into play. Investors have to realize there's a danger level they have to watch for."

source: news.abs-cbn.com

S&P 500 chalks up record high as fear gives way

The S&P 500 surged over 1 percent to a record high close on Monday as tropical storm Irma caused less damage than expected in Florida, and after North Korea did not test-fire missiles over the weekend, which some had feared.

All 11 major S&P 500 sectors rose, led by financial stocks, with insurers advancing as Irma, once ranked as one of the most powerful hurricane recorded in the Atlantic, lost power.

Irma caused severe flooding in many Florida cities and left more than 6 million homes and businesses without power, but damage appeared to be less than expected. That relieved investors, especially in the wake of Hurricane Harvey, whose devastation is estimated to dent third-quarter economic growth.

Geopolitical tensions eased after North Korea did not mark its founding day on Saturday with another launch of a long-range missile, which the United States and its allies had been bracing for.

"It is a risk back on situation, people are going back into the market," said Neil Massa, senior equity trader at Manulife Asset Management in Boston. "For now, it is a relief rally for things on both ends - geopolitical and weather wise."

The Dow Jones Industrial Average rose 1.19 percent to end at 22,057.37 points in its largest one-day gain since February.

The S&P 500 gained 1.08 percent to 2,488.11 and the Nasdaq Composite added 1.13 percent to 6,432.26.

The CBOE volatility index, a widely-followed measure of market anxiety, fell 1.36 points to 10.76.

The S&P 500 financial index jumped 1.74 percent, with JPMorgan up 2.18 percent and insurer Travelers up 2.34 percent.

With investors less worried about Irma's impact, insurers Universal Insurance Holdings and HCI Group surged more than 12 percent, while Heritage Insurance soared 21 percent.

So far in 2017, the S&P 500 has risen 10 percent. It is trading near 17.6 times expected earnings, compared to its 10-year average of 14.3, according to Thomson Reuters Datastream.

"Valuations don't bother me terribly," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York. "I don't think we're at a level where valuations themselves are going to cause a correction."

Apple rose 1.81 percent a day ahead of the expected launch of a new iPhone, providing the biggest boost to the Nasdaq and S&P 500.

Tesla jumped 5.91 percent on news that China was studying when to ban the production and sale of cars using traditional fuels.

Teva jumped 19 percent after the generic drugmaker named a new chief executive.

Advancing issues outnumbered declining ones on the NYSE by a 3.73-to-1 ratio; on Nasdaq, a 2.56-to-1 ratio favored advancers.

About 6 billion shares changed hands in US exchanges, above the 5.8 billion daily average over the last 20 sessions.

source: news.abs-cbn.com

Asia stocks try to share Wall St joy, US yields a burden

SYDNEY - Asian stocks crept to one-week highs on Wednesday as investors tried to share in the exuberance of Wall Street, where the three main indices seized record peaks for a second straight session.

Australia's main index led the early action with a rise of 0.5 percent to a one-month top, helped by strength in bulk commodity prices.

Japan's Nikkei was closed for a holiday after enjoying a five-session winning streak that took it to the highest finish since January.

MSCI's broadest index of Asia-Pacific shares outside Japan also added 0.3 percent, edging further away from four-month lows hit on Monday.

Emerging market shares have struggled in recent days as surging US bond yields sucked much-needed capital out of Asia. President-elect Donald Trump's past talk of trade tariffs has also weighed on sentiment in the export-intensive region.

Analysts at JPMorgan said Trump's latest pledge to dump the Trans-Pacific Partnership was already priced into markets.

"What may not be factored in is the possibility of follow-through on other, more protectionist campaign proposals," they wrote in a note to clients.

"We remain concerned about this as a source of downside risk, delivering a negative surprise to markets which so far appear to be enamored of his emphasis on fiscal stimulus and deregulation since the election."

That love-affair was evident on Wall Street where the Dow closed up 0.35 percent and above 19,000 for the first time. The S&P 500 gained 0.22 percent and the Nasdaq 0.33 percent.

Still, the market is starting to look expensive with the S&P 500 trading near 17.3 times forward 12-month earnings, compared to the 10-year median of 14.7, according to StarMine data.

YIELDS UNDERMINE EURO

With equities in demand, US bonds were getting the cold shoulder. Two-year note yields rose as far as 1.107 percent on Tuesday, the highest since April 2010.

Yet euro debt was thrown a lifeline by European Central Bankers who reaffirmed their commitment to super-easy monetary policy. That saw yields on German two-year paper dive to record lows around -73 basis points, which in turn expanded the yield premium offered by Treasuries to an 11-year peak.

The widening spread kept the euro pinned at $1.0628, not far from last week's one-year trough at $1.0569. Against a basket of currencies, the dollar was steady at 101.00.

The dollar also kept most of its recent hefty gains on the yen at 111.00, though it has met resistance around 111.35 in the last couple of sessions.

Sterling was precariously poised at $1.2422 ahead of a budget update from British Finance Minister Philip Hammond.

Analysts expect some modest infrastructure spending and housing stimulus, but nothing that would radically change expectations of a weaker economy next year when difficult talks begin on the terms of Brexit.

Oil prices were steady for the moment as the market hung on every comment from OPEC officials on whether cartel members would agree to an output cut.

Brent crude was up 15 cents at $49.05 a barrel, while U.S. crude added 2 cents to $48.05 a barrel.

Industrial metals advanced on talk of demand from China and the whole global reflation trade. Copper hit a 16-month high, while iron ore surged anew thanks to higher steel prices.

source: news.abs-cbn.com/

Metrobank prices $723-M rights offer at discount

MANILA - Metropolitan Bank & Trust Co (Metrobank) priced on Tuesday its rights issue at P73.50 ($2) per share, a discount of about 21 percent to the stock's average price since the start of the year.

The Philippines' second-largest lender in terms of assets could raise as much as P32 billion ($723 million) from the share offer running from March 23 to March 27, the country's largest equity offering in two years.

The bank is offering one rights share for every 6.3045 common shares held as of March 18, it said in a filing to Manila stock exchange.

Shares of Metrobank rose as much as 0.7 percent to hit P94.50 in a largely flat market.

Analysts said the discount was aimed at attracting as many subscribers as possible. "I think it's more of an incentive for the shareholders to exercise their right," said April Lee Tan, research head at COL Financial in Manila.

The bank is seeking to raise Tier 1 capital to comply with Basel III standards, keeping pace with loan growth while bracing for stiffer competition after the Philippines enacted a law allowing foreign banks to take full control of domestic lenders.

JPMorgan and UBS AG are joint global coordinators, joint international lead managers and joint book runners for the issue. The Philippines' First Metro Investment Corp is the sole domestic lead manager and HSBC is the transaction's co-manager.

source: www.abs-cbnnews.com

JPMorgan chief admits bank's 'credibility' at stake

WASHINGTON -- JPMorgan Chase CEO Jamie Dimon admitted on Sunday that a $2 billion loss on derivatives trades had jeopardized the bank's credibility and given regulators a fresh opportunity to target Wall Street.

Dimon told NBC's "Meet the Press" program that the big loss incurred by the New York-based bank, which triggered a slide in banking shares on Friday, was damaging, but not bad enough to stop the company making a profit.

The Wall Street boss has led US banks in fighting the application of the new Volcker Rule, named after former Federal Reserve chairman Paul Volcker, which would ban so-called proprietary trading, when banks trade on their own accounts. Banks are also resisting proposed curbs on their hedging activities.

Asked if JPMorgan's losses had given regulators new ammunition to clamp down on Wall Street after the US government bail out of several financial institutions during the 2008 crisis, Dimon replied: "Yes, absolutely. This is a very unfortunate and inopportune time to have had this kind of mistake."

He denied that the unexpected losses from a hedging scheme -- designed to lower investment risk, but which spectacularly backfired -- had placed the company in jeopardy, though unwanted ramifications could follow.

"It's a question of size. This is not a risk that is life-threatening to JPMorgan," said Dimon, who late Thursday told analysts that the loss could increase to $3 billion through the end of June due to market volatility.

"This is a stupid thing that we should never have done, but we're still going to earn a lot of money this quarter. So, it isn't like the company is jeopardized.

"We hurt ourselves and our credibility yes, and we've got to fully expect and pay the price for that."

The interview with Dimon was conducted Friday after JPMorgan shares closed down 9.3 percent, wiping $14 billion off the market value of the bank.

The shock loss came over the past six weeks in the New York bank's risk management unit, the Chief Investment Office, and involved trading in credit default swaps, a so-called "synthetic hedge."

The losses were a humiliation for Dimon -- one of Wall Street's best known titans -- and for the bank, after it proudly came through the financial crisis in far better shape than many of its rivals.

Politicians who have called for the tightening of bank regulation and tougher controls on proprietary trading -- when banks' trade on their own accounts -- have seized on JPMorgan's losses.

On Sunday, Barney Frank, a Republican congressman and former chair of the House Financial Services Committee who drew up the Dodd-Frank financial reform bill after the 2008 crisis, said banks were not being unfairly targeted.

He said "we have stopped... them from losing money in ways that would cause damage to the rest of the system," while accusing Republicans of trying to reduce funding for the government agency that monitors derivatives trading.

Dodd-Frank was signed into law by President Barack Obama in 2010 with the intention of preventing high risk activities on Wall Street, which four years ago culminated in a global recession, from impacting the wider economy again.

Although the reforms imposed new regulations for banks, hedge funds and private equity activities, some lawmakers have said the rules do not go far enough.

Frank said the Volcker rule on proprietary trades, which Wall Street leaders and some lawmakers have argued would amount to an unnecessary block on its freedom to conduct business, "is still being formulated."

"It's a complicated thing," Frank added.

article source: interaksyon.com

JPMorgan Chase (JPM)- Earnings Report on July 14th, 2010 – Video