JPMorgan's profit fell 17% as a result of slow dealmaking and increased loan loss reserves.
The largest American bank, JPMorgan Chase & Co. (JPM.N), reported a 17% decline in third-quarter earnings on Friday as a worsening economic outlook limited dealmaking and forced it to increase its reserves for potential defaults.
Results from the largest U.S. bank are being keenly monitored to determine the true impact of the Federal Reserve's aggressive rate hikes to combat inflation on corporate America.
In the United States, consumers continue to spend with strong balance sheets, there are many job openings, and businesses are still in good condition, according to Chief Executive Officer Jamie Dimon.
However, Dimon issued a warning that considerable obstacles exist in the form of rising interest rates, inflation, and geopolitical unrest.
Generally speaking, banks benefit from rising interest rates because they can charge borrowers more money for their loans, but the wider possibility of an economic downturn, higher borrowing costs, and the conflict in Ukraine could obfuscate the economic picture and harm future profits.
JPMorgan's quarterly earnings for the three months ended September 30 was $9.74 billion, or $3.12 per share, down from $11.69 billion, or $3.74 per share, in the same period last year.
Analyst expectations for each share were $2.88. If the stated figures were comparable to estimates was not immediately apparent.
The bank set aside $808 million in reserves as worries about an economic downturn are heightened by the Fed's interest rate increases.
In contrast, the bank released $2.1 billion in reserves it had set aside for anticipated COVID losses during the same period last year.
One of the bank's largest businesses, investment banking, saw a 43% decline in revenue to $1.7 billion as buyers and sellers put projects on hold as a result of high inflation and impending recession worries.
In contrast to a record run last year, the lack of activity has caused a decline in banks' fees from underwriting and advising M&A and initial public offerings.
The bank increased its quarterly revenue from $29.65 billion to $32.72 billion.