Tight Credit Markets Hits Banking’s Big Beasts…

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and his Morgan Stanley counterpart, James Gorman, both said Thursday that they aren’t steering their firms toward shelter even as they see a confluence of global events denting the economy in the months ahead.

“The consumer right now is in great shape,” Dimon said on a conference call discussing his company’s second-quarter results. “So even if we go into a recession, they’re entering that recession with less leverage and in far better shape than they did in ’08 and ’09.”

Gorman, on his bank’s earnings call, said a deep or dramatic recession in the US is unlikely, and Morgan Stanley is “long the US” in most of its businesses. “The US is a great region to be in the world.”

Those verdicts come even as second-quarter results at both JPMorgan and Morgan Stanley were hurt by a slowdown from the pandemic-era bonanza that gave them record revenue and profits.

Risks abound, with soaring inflation spurring central banks around the world to dial back the easy-money policies that had pushed markets to all-time highs. Russia’s invasion of Ukraine, along with worries about food and energy security as well as political instability across regions, are also keeping investors on edge.

“If I had to use one word to describe it, it would be ‘complicated,’” Gorman said on the challenges facing the global economy. He said that “Europe is fighting the hardest,” with the dual threat of the war in Ukraine and pressure on gas prices that’s been particularly problematic for countries such as Germany.

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  1. Oh yes, this is interesting indeed. Empire banks, now that is a inscrutable Byzantine world of intrigue isn’t it. It’s best to remember their fate depends on the fate of the Empire itself and BRICs is building quite the horde to assault those financial fortifications. “Great shape”? What else would you expect Jamie Dimon to say? Augustus liked to call himself ‘first amongst equals’ didn’t he, but everyone knew the truth. Methinks, its likely to be satellites like Deutschbank that is headed into the Teutoburg Forest this time where the Slavs will have quite a surprise for the Germans.

    Don’t book too large a party at the Restaurant at the End of the Universe Mr. North. A cosy table for two will all that will be needed as the rest of us will be living in Reality.

  2. Not really Martin. US corporate spreads are still – very – modest. In fact while there's been some volatility, US Aaa corporates are barely above where they were before the March 2020 convertibility crisis. EM and even here is a different story though.

  3. @walk the world. Hi Martin, been following you for a couple of years now and really value and appreciate your wisdom. What are my chances of getting some financial advice from you on my current situation? Love your work👍🏼

  4. This brings tears to my eyes hearing of banks having lower profits. All of those drugs not being consumed, hookers not getting business. We really need to pitch in to save the banks.

  5. The banks will be reducing lending because of higher losses. There will be a lot of auto loans going into default. This will impact the automakers financial divisions first, but the contagion will impact other sectors. It’s going to be the second tier financial institutions the biggest losers. The US housing market is already showing signs of topping and crashing.

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