When Jamie Dimon speaks, Wall Street listens.
The JPMorgan Chase (JPM 0.43%) CEO is on the short list of the most respected business and finance leaders in the country. Dimon has run the nation's No. 1 bank by assets for more than 16 years. And he hasn't been shy about sharing his unique insights into the economy based on what he sees running the company, which offers an array of services, from credit cards and mortgages to investment banking and commercial loans.
In recent weeks, Dimon has predicted a recession on more than one occasion, and JPMorgan Chase's third-quarter report Friday morning is likely to be closely watched as an early bellwether for the upcoming earnings season. Additionally, investors will want to pay attention to the bank's earnings call, because Dimon is likely to share his thoughts about the U.S. economy and the chances of a recession.
Along with quarterly earnings releases, companies hold earnings calls to highlight key developments, provide details from the period, and answer questions from Wall Street analysts. The third-quarter release will have all the numbers for the quarter, but the call can make news as well, especially when someone like Dimon is involved.
Dimon's thoughts on a recession
In a CNBC interview earlier this week, Dimon said a "very, very serious" combination of headwinds was likely to push both the U.S. and global economies into a recession within the next six to nine months. He also said the S&P 500 could fall another 20%. The top banker pointed to inflation, rising interest rates, quantitative tightening from the Fed, and the war in Ukraine as key factors.
In August, Dimon also predicted the country only had a 10% chance of avoiding a recession, and he was more confident there would be "something worse" than a recession, giving that a 20% to 30% chance, though he didn't explain what that was.
Back in June, Dimon had said he was preparing his company for a "hurricane" due to the war in Ukraine and sky-high inflation. He often refers to JPMorgan's balance sheet as a "fortress," implying that it's designed to withstand tough times.
What to look for in the report
In addition to comments from Dimon on the earnings call and in the press release, investors will want to keep an eye on the third-quarter results, including commercial loan growth, credit card volumes, and provisions for credit losses or loan loss reserves, which reflect the company's economic outlook because it writes down loans that are expected to default.
Rising interest rates could be a bright spot for the bank, because they should drive growth in net interest income, or the spread between what it collects on loan interest and what it pays in interest on deposits.
Wall Street has low expectations for JPMorgan's results. The analyst consensus is for revenue to increase 7.8% to $32.1 billion, but earnings per share are projected to fall from $3.74 to $2.91, a sign of the economic headwinds that have formed in recent months. Plus, the bank is lapping a quarter in which it released $1.6 billion in provisions for credit losses, inflating its year-ago profit.
We might not know if JPMorgan will beat those estimates, but we do know one thing: Given the company's unique position as an economic indicator and Dimon's status in the financial world, the big bank's results and management's commentary are likely the move the market on Friday.