JP Morgan remains the world’s biggest bank, but does it matter in the face of a global recession?
The biggest bank in the world becomes bigger, despite economic hardships in the most advanced and developed economies in the world. JP Morgan, the largest of the US “Big Four” banks, reported increased revenues beating Wall Street expectations.
JP Morgan reported $40.7 billion in revenues in the last quarter, a 21% surge compared to the previous three months. Earnings likewise increased by more than expected, adding $13.2 billion (a 35% increase) to the bank’s reserves.
CEO Jamie Dimon expressed optimism on the current state of the US economy, saying that it remains resilient despite risks of high inflation and “higher for longer” interest rates. Dimon said that businesses and consumers “generally remain healthy” for the moment.
JP Morgan was consequential for the prevention of the US banking system earlier this year. Between January and March, three of the US largest financial institutions collapsed: Signature Bank, Silicon Valley Bank, and, most importantly, First Republic Bank all failed to meet their obligations.
This sent shockwaves across the Western banking system, with even European institutions like Deutsche Bank and Credit Suisse dangling over the cliff edge.
JP Morgan won the government auction for the acquisition of First Republic’s assets, essentially saving the United States from a total financial collapse.
However, the success of JP Morgan in the last quarter should not distract us from the bigger picture.
“The most dangerous time in decades”
According to Dimon, the “garden” is stable and prosperous for now, but the “jungle” is getting dangerously close.
With the wars in Ukraine and Palestine, with Saudi Arabia and Russia colluding for higher crude prices, and with inflation edging up despite worryingly high interest rates, this could be “the most dangerous time the world has seen in decades,” Dimon said.
Indeed, despite the higher-than-expected cash flow, investment banking revenues dropped by 6%, and overall investment banking by 3%.
Americans are running out of savings; shelter and energy prices are too high, and public debt reaches new highs every month.
With yesterday’s inflation reading showing a worse situation than expected, the Federal Reserve might be forced to hike interest rates one more time in 2023. Markets have been overwhelmingly positive so far, but another hike might be the last straw.
Although the International Monetary Fund (IMF) revised GDP predictions upward, they did the same one quarter prior to the 2008 recession. And a recession in 2024 might complicate the geopolitical outlook even further, as it is an election year in the United States.
The Federal Reserve, banks, and US President Joe Biden must be wary of a recession. But it might be too late.
