JPMorgan Chase CEO Jamie Dimon expects continued global economic growth despite intensifying geopolitical and trade tensions, as the nation’s top bank prepares itself for several interest rate cuts in 2019 that could undermine profits.
“I wouldn’t get too pessimistic yet,” he told reporters and investors on Tuesday, adding that the consumer remains strong and business sentiment is resilient in the midst of an ongoing trade skirmish with China and others.
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President Trump and Chinese President Xi Jinping recently agreed to hold off on any new tariffs as trade talks between the two nations begin again, alleviating a key point of uncertainty for U.S. firms.
Still, negotiations remain fragile as China and the U.S. continue to spar over the existing duties, as well as the Trump administration’s push to force the Asian nation to strengthen its laws to protect American companies operating in the country.
Domestically, Chase is planning for three cuts to interest rates this year, the first of which could occur at the end of July when the Federal Reserve holds its next meeting. Chairman Jerome Powell signaled toward the pending action during two days of testimony on Capitol Hill earlier this month.
With one reduction, net interest income could top $57.5 billion. Additional cuts would further erode those earnings, according to newly-minted CFO Jennifer Piepszak.
“The range of outcomes are incredibly broad,” she said on the firm’s earnings call. “We’re not going to change the way we run the company because of the rate environment.”
Bank earnings are under pressure from both the Fed’s likely move to cut interest rates at least once this year and lower trading revenue, despite the top three equity exchanges reaching record numbers.
The Fed’s decision to raise interest rates in December helped spur a 7 percent increase in profits at Chase’s lending business to $14.4 billion. Any reduction would undermine that growth, given that banks earn more money on consumer lending when interest rates are higher.
Overall, the New York-based company reported net income of $2.82 per share, of $9.7 billion, better-than-expected results fueled, in part, by a one-time resolution of tax audits.