JPM Stock Alert: JPMorgan Signals Trouble Ahead for Bank Stocks

  • Shares of JPMorgan Chase (JPM) are down today after the bank issued disappointing second-quarter results.
  • It also suspended its JPM stock buyback program following the downbeat quarter.
  • Banks are viewed as a barometer for the health of the U.S. economy, and today’s earnings print was not encouraging.
JPM stock - JPM Stock Alert: JPMorgan Signals Trouble Ahead for Bank Stocks

Source: Roman Tiraspolsky /

Shares of JPMorgan Chase (NYSE:JPM) are down more than 4% today after the bank reported its second-quarter profit fell 28%. It also announced it is suspending its JPM stock buyback program.

JPMorgan, which is the world’s largest lender, attributed the profit decline to $428 million of reserves it had to set aside to cover bad loans as per a regulatory requirement. The New York-based bank also said that it is “temporarily” suspending its share repurchase program to meet ongoing regulatory capital requirements. In June this year, the bank froze its dividend payment at current levels while other major American banks raised theirs.

JPM stock is down more than 30% so far this year, finishing trading July 13 at $111.91 a share.

What Happened With JPM Stock

JPMorgan reported that its Q2 profit fell 28% from a year earlier to $8.6 billion, due largely to the loan reserves it was forced to set aside. A year ago, the bank’s financial statement got a boost from a reserve release of $3 billion.

The bank reported earnings per share of $2.76 versus the $2.88 that was expected on Wall Street. Revenue for the April through June period came in at $31.63 billion versus the $31.95 billion that was anticipated by analysts.

Some analysts have started to lower their forecasts for the U.S. banking sector amid recession worries, and related stocks are currently hovering near 52-week lows. Banks are also expected to see their finances diminished by a slowdown in deals this year, namely mergers and acquisitions and initial public offerings.

Indeed, JPMorgan reported its Q2 investment banking fees fell 54% to $1.65 billion, $250 million below an expected $1.9 billion. Meanwhile, fixed income trading revenue rose 15% to $4.71 billion, which was still less than estimates of $5.14 billion.

Why It Matters

Major banks such as JPMorgan Chase are viewed as a bellwether for the health of the U.S. economy. The current environment is seen as a double-edged sword for lenders. While rising interest rates and loan growth can be more profitable for banks such as JPMorgan, higher rates can also lead to a greater number of loan defaults and more rigorous capital requirements, which can dent profits. A slowdown in the global economy and potential recession could also lead to businesses and consumers taking out fewer loans.

On a conference call with analysts following the second-quarter print, JPMorgan CEO Jamie Dimon said the bank’s outlook for the remainder of this year hasn’t changed, but some macroeconomic concerns had worsened in recent months. Specifically, Dimon said he is worried about rising interest rates, an energy crisis in Europe, a global recession and the ongoing war in Ukraine. In June, he said that an economic “hurricane” is on its way.

What’s Next for JPM Stock

JPMorgan’s disappointing results are sending its stock — and other bank stocks — lower today, adding to already-depressed share prices. Given the gloomy economic outlook, it is likely bank stocks will continue to fall in the coming weeks. While somewhat concerning, the drop in share prices could provide a buying opportunity for investors who have a long-term horizon.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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