JPMorgan Boosts Credit Reserves As Profits Tank, Jamie Dimon Warns About ‘Significant Challenges Ahead’

While JPMorgan’s quarterly revenue came in slightly higher than expected at $31.6 billion, the bank’s first-quarter profit tanked 42% from a year earlier, to $8.28 billion, as dealmaking and trading activity slowed amid ongoing uncertainty in markets.

Another warning sign for investors was that JPMorgan is building up its credit reserves—increasing provisions for loan losses to $1.5 billion—as it unwinds its exposure to Russia and faces “downside risks due to high inflation and the war in Ukraine.”

The bank said profits were impacted by a $902 million charge tied to building credit reserves for anticipated loan losses, as well as $524 million in losses from market disruptions caused by Russia’s invasion of Ukraine.

With JPMorgan kicking off earnings season, Wall Street investors will likely be worried about similar trends in upcoming bank results: “There are a lot of moving pieces in this report,” but the “negative” credit news “will likely cause a bit of anxiety for the whole group,” says Vital Knowledge founder Adam Crisafulli.

Some bank stocks moved lower on the news Wednesday: JPMorgan fell roughly 2%, while Citigroup and Wells Fargo also moved slightly lower but Goldman Sachs and Morgan Stanley traded flat.

While bank shares are expected to benefit from rising interest rates—with the Federal Reserve planning several big increases this year, they could also take a hit from rising recession fears, such as the recent inversion of the yield curve.