JPMorgan Expects Credit Losses to Stay Low Through ’23

Fears of a recession have landed the markets in hot water, though JPMorgan doesn’t think there’s much cause to worry, The Wall Street Journal (WSJ) wrote.

The bank says credit losses will likely be abnormally low through next year.

That comes as customers haven’t drained their cash balances, which grew during the pandemic, according to executives speaking at the bank’s investor day on Monday (May 23).

That said, CEO Jamie Dimon isn’t counting out a recession — while the economy is still strong because of actions by the government in 2020, there’s no telling what’s ahead.

“It’s a different strong economy,” Dimon said. “If we go into a recession, it may be different from other recessions.”

The report said executives haven’t seen any signs of trouble in loan delinquency numbers, and don’t expect to add more loan-loss reserves in the current quarter. That came after the bank surprised the markets after setting aside more money to cover possible losses earlier in 2022.

According to executives, lower income customers, who make up a smaller slice of its consumer base, have been getting overwhelmed by the effects of inflation, with those with low credit scores often falling behind on credit cards, car loans and other payments.

But the bank says it’s still pretty sure consumers are financially healthy enough to debut new credit products.

See also: JPMorgan’s $1B Loss Reserve Signals Souring Loans and ‘Pain’ Ahead for FinTechs

JPMorgan recently reported its first-quarter earnings, and had also recently built $902 million in reserves, which showed how tough the credit environment would be going forward.

According to i2c President Jim McCarthy, FinTechs might feel pain because they have never operated in such an environment.

He said it would be interesting to see how they “manage these big changes in the macroeconomic climate.”