Earnings season kicks off with a stark warning from JPMorgan CEO Jamie Dimon

Geopolitical uncertainty was top of mind when JPMorgan Chase, Citigroup, and Wells Fargo reported Q3 2023 earnings on Oct. 13. Jamie Dimon, chairman and CEO of JPMorgan Chase, gave a stark warning about the possible implications of the Israel-Hamas conflict, and the big banks weighed in on the trajectory of the U.S. economy.

“The war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships,” Dimon said in a statement accompanying the Q3 earnings report. “This may be the most dangerous time the world has seen in decades. While we hope for the best, we prepare the firm for a broad range of outcomes.”

He did offer a glimmer of optimism: “Currently, U.S. consumers and businesses generally remain healthy, although consumers are spending down their excess cash buffers.” 

“The overall economic picture, at least currently, looks solid,” JPMorgan CFO Jeremy Barnum said during the Q&A portion of the firm’s earnings call. “The sort of immaculate disinflation trade is actually happening. So those are all reasons to be a little bit optimistic in the near term, but it’s tempered with quite a bit of caution. ” 

Dimon cautioned that it may not be smooth sailing ahead for investors. “Because markets do well is not a reason ever to say they’re going to continue to do well,” he said on the call. “If you don’t believe me, remember 1987, 1990, 1994, the year 2000, the year 2009, and people don’t predict those inflection points. But my caution is that we are facing so many uncertainties out there.”

In the third quarter, JPMorgan earned $39.9 billion in revenue, a 22% year-over-year increase. The firm’s net income increased 35% to $13.2 billion. Both numbers beat Wall Street analysts’ estimates.

Interest rates

Citigroup CEO Jane Fraser struck a similarly cautious tone. “I’m struck by how consistently CEOs are less optimistic about 2024 than a few months ago,” she said during the earnings call. “The shift in the rate question from how high to how long has catalyzed more client activity, however. Corporates have stopped waiting for rates to come down and are beginning to access the debt capital markets around the globe.” 

Last month, the U.S. Federal Reserve left its key interest rate unchanged for the second time in its past three meetings. However, traders see a stronger chance the Fed will end up calling for another interest-rate hike this year, after data showed that consumer prices rose more than expected in September, Reuters reported.

Fraser also addressed Citigroup team members in Israel. “We are a significant bank in the country, and many of our people have lost friends and loved ones,” she said. “Others are being called up to serve. Despite all they’re dealing with, they are keeping our bank running in the country.” She added, “More broadly, the price innocent civilians are paying as this crisis unfolds, is absolutely devastating to witness.”

Citigroup reported for Q3 2023 net income of $3.5 billion, or $1.63 per diluted share, on revenues of $20.1 billion, which beat Wall Street’s expectations of $19.31 billion. Revenue is up about 9% year over year from $18.5 billion in Q3 of 2022, and net income is up by 2%. Last month, Citigroup announced changes in its organizational structure, which will result in some job losses.

Citigroup CFO Mark Mason said on the earnings call that technology spend across the firm was $3 billion in the quarter, up 8%. Citigroup is continuing to invest in product development and technology for platform enhancement, which is part of a transformation to modernize the firm, he said.

Housing market

“Looking ahead, the U.S. economy has continued to be resilient with key support from strength in the labor market and strength in consumer spending,” Wells Fargo CEO Charlie Scharf noted on the company’s earnings call. But the bank’s, “base case remains a continued slowing of the economy.” Wells Fargo is preparing for “a wide range of scenarios, given there is still significant uncertainty ahead,” Scharf said.

By midday Friday, WFC was up by more than 3% after its net interest income increased 8.3% from a year ago to $13.1 billion in Q3. 

Wells Fargo CFO Mike Santomassimo explained the bank was seeing some headwinds when it comes to real estate. Mortgage originations declined 70% from a year ago, Santomassimo said, and home lending revenue declined 14% from a year ago.

Wells Fargo will continue to reduce headcount in home lending in the third quarter, down 37% from a year ago, “and we expect staffing levels will continue to decline,” Santomassimo said.

Sheryl Estrada
sheryl.estrada@fortune.com

Leaderboard

James Mollica was named interim CFO at Analog Devices, Inc., (Nasdaq: ADI) effective Oct. 29, until a successor CFO is named as a result of a search, according to an SEC filing on Oct. 12. Mollica has served at the company for 35 years, most recently as the company’s VP of finance, global customer office, since December 2021. Before that, Mollica served as the company’s maxim integrated chief financial officer, and as VP of FP&A and treasurer. 

Madonna Park was named CFO at Switch, a technology infrastructure company that develops data center campuses for enterprises. Park brings more than 20 years of experience as an investment banker and equity research analyst. She joins Switch after more than 17 years with RBC Capital Markets, where she most recently served as managing director and global head of communications infrastructure. Park has led and executed numerous M&A and capital market transactions in the data center space across North America, Europe, and Asia.

Big deal

The Global Financial Stability Report released by the International Monetary Fund (IMF) forecasts that global growth will slow from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024, well below the historical (2000–19) average of 3.8%. On average, advanced economies are expected to slow from 2.6% in 2022 to 1.5% in 2023 and 1.4% in 2024 due to the effects of policy tightening, according to the report.

Emerging market and developing economies, on average, are projected to have a modest decline in growth from 4.1% in 2022 to 4.0% in both 2023 and 2024, IMF predicts. In regards to global inflation, IMF forecast it to decline from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024, as a result of tighter monetary policy aided by lower international commodity prices. 

Going deeper

3 Project Management Strategies for a Hybrid Workplace, a new report in Harvard Business Review, points to three key areas for hybrid project managers to think about: How to plan and kick off the project with the right people and expectations, how to set up tools so everyone can use them, and how to use meetings effectively.

Overheard

"These large language models are very generically trained. What we are trying to achieve is really bring in the best, let’s say tax professionals, to really fine-tune, retain, and retrain.”

—Beatriz Sanz Sáiz, global consulting data and AI leader at EY, told Fortune in an interview. EY has created an in-house AI platform called EY.ai. Microsoft provided the firm early access to Azure OpenAI, in order to build a secure and specialized system.