JPMorgan Card Chargeoffs Rise as Dimon Warns on Inflation

Consumers are still spending, but JPMorgan CEO Jamie Dimon, in remarks accompanying the banking giant’s latest earnings Friday (April 12), detailed concerns over inflation’s impact.

And “persistent inflation pressures,” as he termed them, among other factors, will be unpredictable.

As Dimon stated in the earnings release, “we have never truly experienced the full effect of quantitative tightening on this scale. We do not know how these factors will play out, but we must prepare the firm for a wide range of potential environments.”

The remarks and the earnings came as JPMorgan reported that net charge-offs tied to its card services segment stood at 3.3%, up from 2.1% a year ago.

The data shows that debit and card sales volumes were up 9% year on year, to $420 billion.

At the same time, end of period deposits were  down 7%  year on year, to just over $1 trillion.

Active mobile customers in the latest quarter were 54.7 million, increasing by 7% year over year.

Investors sent the shares 6% lower during intraday trading.

Consumers Still Healthy

CFO Jeremy Barnum noted on the call that  “consumers remain financially healthy, supported by a resilient labor market. While cash buffers have largely normalized, balances are still above pre pandemic levels. … Overall spend is in line with prior years.”

Barnum, later in the call, noted at least some pressure on some consumers, adding that “the extra money of the lower-income folks …normalizing, as you see credit normalizing a little bit.” But, generally speaking, “the customers are in pretty good shape, and even if we go into a recession, they’re in pretty good shape.”  He also observed that “there is a little bit of evidence of … substituting out of discretionary into nondiscretionary” spending categories.

Asked by analysts about activity related to deposits, Barnum said that there’s been a continued “migration” from savings to CD accounts.

“We really don’t think it makes sense to assume that in a world where checking and savings is paying effectively 0% and the [CD] policy rate is above 5% that you’re not going to see ongoing migration,” said Barnum, noting that deposit balances in the future will likely be “flat to modestly down.”

Analysts asked about the company’s wholesale payments business, which Barnum contended remains an area of promise, no matter the economic or geopolitical environment.

“We’re talking fundamentally about moving money through pipes around the world, and that’s the thing that people need to do more or less no matter what,” said Barnum.