JPMorgan Chase (JPM) CEO Jamie Dimon warned Friday that the economy faces “considerable turbulence” even as his bank reported a rise in first-quarter profits, and said “we continue to believe it is prudent to maintain excess capital and ample liquidity in this environment.”
The bank’s earnings of $14.64 billion rose 9% from the year-ago quarter, but it also set aside 75% more provisions to cover future loan losses — a sign that it expects borrowers to run into more problems ahead.
Dimon said investment banking “clients have become more cautious amid an increase in market volatility driven by geopolitical and trade-related tensions,” but his bank’s Wall Street operations still performed well during the early chaos of President Trump’s trade war.
JPMorgan’s combined equity, fixed income, currencies and commodities operation pulled in its biggest quarter of revenue since the beginning of the Covid-19 pandemic. Trading revenue also surged during the quarter at one of its rivals, Morgan Stanley (MS).
In discussing the current economic turbulence roiling markets, Dimon cited “potential negatives” of tariffs and trade wars, sticky inflation, high fiscal deficits and volatility. He also mentioned “potential positives” of tax reform and deregulation.
“As always, we hope for the best but prepare the firm for a wide range of scenarios,” saying the bank would maintain excess capital and liquidity after buying back $7 billion of common stock during the first quarter.
“We have an extraordinary amount of liquidity, with $1.5 trillion of cash and marketable securities.”
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Other Wall Street CEOs on Friday also cited the effects of the turmoil surrounding Trump’s trade actions, which include a 145% tariff on China and separate duties on other countries and industries.
“Uncertainty and anxiety about the future of markets and the economy are dominating client conversations,” BlackRock (BLK) Chief Executive Officer Larry Fink said in a statement. BlackRock is the world’s largest money manager.
“We’ve seen periods like this before when there were large, structural shifts in policy and markets – like the financial crisis, Covid and surging inflation in 2022.”
Robin Vince, BNY (BK) President and CEO said that “looking ahead, we are prepared for a wide range of macroeconomic and market scenarios as the outlook for the operating environment is becoming more uncertain.”
Wells Fargo (WFC) CFO Mike Santomassimo told reporters “we do expect that all these tariffs will have an impact on growth this year in the US, and I think many customers are trying to evaluate what that really means to them.”
He expects some customers to “pause at least temporarily as they try to get a better sense of what the course, what the direction is.”
The voice investors most wanted to hear Friday was from Dimon, who said earlier this week said he expects tariffs to produce higher inflation and slower economic growth and told Fox Business Network’s Maria Bartiromo that a recession is now a “likely outcome.”
That was also before Trump decided to pause for 90 days the implementation of so-called reciprocal tariffs for many countries, stoking hope on Wall Street the steep duties could be negotiated lower.
JPMorgan CEO Jamie Dimon on Wednesday was interviewed by Maria Bartiromo on the “Mornings with Maria” program, on the Fox Business Network. (AP Photo/Richard Drew) · ASSOCIATED PRESS
Some on Wall Street gave Dimon credit for swaying the president, since Trump did mention that he had seen and liked Dimon’s Wednesday morning appearance on Fox Business Network’s “Mornings with Maria.” The interview had been scheduled before the initial tariff announcements, according to a person close to Dimon.
“He was very good,” Trump said outside the White House Wednesday after announcing his 90-day pause.
Dimon this week discussed other possible outcomes of the unfolding chaos, including stress among bank borrowers.
“If you have rates going up a little bit, and inflation is sticky, and credit spreads are gapping out, which they’re going to, I think you’ll see more credit problems than people have seen in a long time,” he added.
The signs of stress on Wall Street have certainly been mounting in the last week. IPOs and mergers were put on the shelf. Leverage loan deals were shoved to the sidelines. Bond sales were paused.
“We’ve lost a couple bond deals already,” Dimon said in his Fox Business interview.
Wall Street is also reckoning with other forms of chaos that still have the potential to roil the financial system.
The FT reported this week that hedge funds were receiving the steepest margin calls since the 2020 COVID-19 crisis, meaning Wall Street banks were asking them to come up with cash to cover losses. That may have triggered more fire sales of losing positions.
Banks have plenty to worry about if the tariff turmoil worsens. Even without a recession, an economic slowdown sparked by a trade war could strangle M&A deals and demand for loans. It could also put more corporate borrowers and consumers under duress, making it difficult for them to pay back their loans.
Such shifts may also spur a change in hiring needs and could lead to layoffs at major financial institutions.
When asked Wednesday whether he was seeing a rising number of companies default on their loans, Dimon said, “Not yet, but I expect them.”
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.
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