Consumer spending is doing well. Card volumes are good.
Credit is doing well too – at least for now. But the last of JP Morgan earnings the results show that, alongside a $902 million loan loss built in anticipation of losses, much remains uncertain.
Those loan-loss reserves represent a marked change from a year ago, when the company reported about $5.2 billion in profit. At the time, the loan loss reserves that had been built up were taken in the context of the pandemic. The total provision for credit losses now stands at $1.4 billion.
This time around, caution is tied to macroeconomic uncertainty, with Fed hikes looming in a bid to stem inflation. CEO Jamie Dimon, alongside figures released on Wednesday April 13, said there are “higher probabilities” of downward movement in the economy – and the risks are mounting.
For now, however, JPMorgan’s latest results showed 21% growth in credit and debit card volumes. Additional material of the company showed that the total card sales volume was $351.5 million.
In a conference call with analysts, Chief Financial Officer Jeremy Barnum said the company “continues to see positive trends.” Additionally, travel and entertainment spending increased and was rated as “robust” on the call.
Credit quality remains strong, management said on the call, even with pressures from rising gasoline prices and broader inflation.
“Right now we don’t see anything to give cause for concern,” Barnum said.
Asked about the accumulation of reserves – the $902 million – management said on the call that $300 million relates to specific holdings on individualized names associated with Russia, and the rest relates to this which Barnum said was a “low to slightly higher probability of a Fed-induced Volcker-like recession in response to the current inflationary environment.
Dimon said, “The consumer has money. They pay off credit card debt. Confidence is not high, but the fact is that they have money and they are spending their money. They still have $2 trillion in their savings and in their checking accounts.
Average loans fell 1% year-on-year to just under $429 billion. The credit card net charge rate was 1.4%, down sharply from just under 3% a year ago. Management said it would be possible to return to pre-pandemic rolling sales at the end of the year.
The imbalances between supply and demand were also evident on the call. The company’s auto builds were $8.4 billion down 25% due to lack of vehicle supply.
Looking ahead, in a more in-depth comment on the call, Dimon said that in reference to competition in the payments space – where Dimon had said that in consumer cards, the company’s market share was 25% – in treasury services, this share was 7%.
Dimon said “we’re building everything we need for real-time payments and some blockchains [projects] …and expand our wholesale capabilities for our customers around the world.
To get to double-digit cash flow, he said, a reasonable time frame could be within the next five years.
Other detailed revenue-related documents showed that the total number of active digital customers increased by 6% to 60.3 million; the total number of active mobile customers increased by 11% to 46.5 million.