JPMorgan (JPM) shares moved lower Monday after CEO Jamie Dimon cautioned investors that its exposure to Russia could clip $1 billion from the bank's bottom line.
In his annual letter to shareholders, published Monday, Dimon said both Russia's invasion of Ukraine, and the ongoing dispute between the U.S. and China over trade, highlight what he called the "critical importance of economic relationships" that will affect geopolitics "for decades".
Ahead of the bank's first quarter earnings next week, Dimon also provided his most detailed assessment of the impact of the Russia-Ukraine conflict on the bank's profits, while also warning that rate hikes from the Federal Reserve "could be significantly higher than the market expects' between now and the end of the year.
"We are not worried about our direct exposure to Russia, though we could still lose about $1 billion over time. But we are actively monitoring the impact of ongoing sanctions and Russia’s response, concerned as well about their secondary and collateral effects on so many companies and countries," Dimon said. "We have been steadfast in our operating principles to be prepared for the unpredictable. Rest assured that our management teams, hundreds of us, globally, have been working around the clock to do the right thing."
JPMorgan shares were marked1.3% lower in early Monday trading at $133.54 each, a move that would extend the stock's year-to-date decline to around 17.3%.
JPMorgan will publish its first quarter earnings on Wednesday April 13, before the market opens, with analysts looking for earnings of around $2.77 per share on revenues of $31.2 billion.
Earlier this year, the country's biggest bank said net interest income, a key measure of profitability, would likely come in at around $50 billion in 2022, down from the 2021 tally of around $52.5 billion and well shy of Street forecasts, but higher rates from the Fed this year will likely alter that forecast next week.
Net interest income for the March quarter is expected to rise 4.6% from last year to $13.48 billion.
"I do not envy the Fed for what it must do next: The stronger the recovery, the higher the rates that follow (I believe that this could be significantly higher than the markets expect) and the stronger the quantitative tightening (QT)," Dimon said. "If the Fed gets it just right, we can have years of growth, and inflation will eventually start to recede. In any event, this process will cause lots of consternation and very volatile markets."
