JPMorgan Chase CEO Jamie Dimon kicked off third-quarter earnings season Friday with a stern warning about geopolitical threats that could hurt the global economy. “Recent events show that conditions are treacherous and getting worse,” he wrote in a press release.
“There is significant human suffering, and the outcome of these situations could have far-reaching effects on both short-term economic outcomes and more importantly on the course of history,” he said, referring to war in Ukraine and Israel’s war against Hamas and Hezbollah.
Dimon noted that inflation is slowing and the US economy has avoided recession but that “several critical issues remain, including large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world.”
The world’s largest bank beat analysts’ expectations last quarter, even as its profit fell 2% from a year earlier.
Shares of JPMorgan (JPM) jumped about 4.5% in morning trading and are 30% higher so far this year.
Global woes
Dimon has been sounding the alarm on geopolitical instability for over a year, repeatedly calling it the largest threat to the global economy and saying that the world order established at the conclusion of World War II is under attack.
Last month, Dimon said that these worries dwarf all others. “Iran, North Korea and Russia, I think you can legitimately call them (an) evil axis,” he said at September’s Financial Markets Quality Conference in Washington, referring to the term first used by George W. Bush in 2002 to describe Ba’athist Iraq, Iran and North Korea.
Dimon’s reimagining of the axis is “working every day to make it worse for the Western world and for America,” he said.
The economy, hurricanes and the Fed
Dimon also expressed some uncertainty about his outlook for the US economy but said that overall it remained resilient.
JPMorgan Chase CFO Jeremy Barnum echoed Dimon’s feelings on an earnings call Friday morning, citing the strength of consumer spending. “We see spending patterns as being solid and consistent with the narrative that the consumer is on solid footing and with a strong labor market,” he said.
Those patterns support the case for a “no landing scenario,” he added, referring to when the economy avoids both a recession and a sharp slowdown, continuing to grow steadily despite higher interest rates.
Still, US federal debt surpassed $35 trillion this year and has been a major point of concern for Dimon. He’s repeatedly warned that rising government debt could stoke inflation and complicate the Federal Reserve’s ability to manage the economy.
While the Fed has become more optimistic, cutting its inflation forecast for this year and next, Dimon isn’t convinced that price pressures will ease so quickly.
“I wouldn’t count my eggs,” he said last month, noting that he only sees a 35% to 40% chance of the economy avoiding recession.
Dimon also acknowledged on Friday the human toll that hurricanes Milton and Helene have taken in the US but minimized the impact they’ll have on the economy.
“First and foremost, our hearts go out to all those people affected and the families who lost lives. We’re also helping our employees and customers, to do everything we can to be prepared at the state level,” he told CNN on a press call. But, he said, the hurricanes likely wouldn’t have large and lasting consequences for the economy.
“Hurricanes have never had a traumatic effect on the global economy,” he said.
Elections and Dimon’s legacy
Friday was JPMorgan’s final earnings call before the upcoming US presidential election on November 5, and Dimon steered clear of wading into political waters, emphasizing that he wouldn’t be endorsing any candidate and didn’t want to comment on the election. His reluctance followed a social media post from former President Donald Trump last week claiming Dimon had endorsed him — a statement that JPMorgan quickly denied.
Dimon also addressed whether or not he would consider taking a government position under the next administration. “I think the chance is almost nil… I love what I do. I intend to be doing what I do. I almost guarantee I’ll be doing this for a long period of time, or at least until the board kicks me out,” he said during Friday’s earnings call.
Credit problems
While JPMorgan beat analysts’ expectations on its earnings on Friday, the bank also reported it set aside $1 billion more in reserves to cover growing losses from unpaid loans.
In the third quarter, the bank set aside $3.1 billion to cover potential loan losses — more than twice as much as last year — mainly due to a 40% rise in unpaid loans, especially in its credit card division.
Despite some signs of an improving economy, JPMorgan said it added to its reserves due to higher card balances and economic uncertainty, which contributed to a 2% drop in quarterly net income to $12.9 billion.
“Cash is a very valuable asset in a turbulent world,” said Dimon on Friday. “You see my friend Warren Buffett stockpiling cash right now. I mean, people should be a little more thoughtful about how we’re trying to navigate in this world and grow for the long term for our company.”
