JP Morgan Chase reported a bigger-than-expected 28 per cent fall in second-quarter profit on Thursday as the largest US bank set aside more money to cover potential losses in the face of growing risks of a recession.
The bank's shares slid more than 4 per cent as it recorded $1.1 billion in provision for credit losses, compared to last year, when it released $3bn from its reserves.
The four biggest US banks are expected to record $3.5bn of loss provisions for the quarter, as they brace for a sharp economic slowdown with the US Federal Reserve aggressively raising interest rates to control runaway inflation.
Chief executive Jamie Dimon flagged various concerns including geopolitical tension, high inflation, waning consumer confidence and the "never-before-seen" quantitative tightening as threats to global economic growth.
Closer to home, however, the economy continues to grow and both the job market and consumer spending remain healthy, Mr Dimon said.
The bank posted a profit of $8.6bn, or $2.76 per share, missing the average analyst expectation of $2.88 per share, said Refinitiv.
Other large US banks including Citigroup, Wells Fargo and Morgan Stanley will report results this week, while Goldman Sachs and Bank of America will round out the big bank earnings season next week.
Analysts have forecast a sharp decline in second-quarter earnings from a year ago, when banks released loan loss reserves and benefited from a boom in deal-making.
The company also temporarily suspended its share buyback to further shore up its capital levels.
JP Morgan's earnings hurt the broader market with US stock index futures extending losses after they were released.
Investment banking revenue fell 61 per cent to $1.4bn, mainly hurt by lower fees from deals and debt and equity issuances.
As is the case with rivals Goldman Sachs and Morgan Stanley, JP Morgan last year rode the deal-making wave and advised on several major business combinations, underwrote some of the biggest stock market flotations and helped to put together deals involving special purpose acquisition companies, or SPACs.
However, Russia's invasion of Ukraine in February and fears around an economic recession dealt a blow to merger and acquisition activity in 2022. The value of announced deals globally in the second quarter dropped 25.5 per cent year-on-year to $1 trillion, according to Dealogic data.
M&A activity in the US also plunged 40 per cent to $456bn in the second quarter.
JP Morgan reported net revenue of $31.6bn, up 1 per cent, while net interest income was $15.2bn, up 19 per cent in the quarter.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
