Higher labor costs bit into JPMorgan Chase's fourth-quarter results, but the US bank still reported on Friday record annual profits of $48.3 billion.
The financial giant pointed to a broadly solid US economy that allowed it to release reserves set aside previously in the Covid-19 pandemic in case of defaults, boosting profits. It has also seen an uptick in overall lending, another sign of increasing economic activity.
But shares fell sharply as the biggest US bank in terms of assets saw an 11 percent jump in fourth-quarter expenses, as Chief Financial Officer Jeremy Barnum pointed to "somewhat elevated attrition" in the workforce that has resulted in wage hikes.
JPMorgan Chase also signaled spending would remain elevated, projecting 2022 expenses of $77 billion, up from $70.9 billion last year.
Chief Executive Jamie Dimon described inflation as among the key challenges for the economy. Dimon said the current uptick in prices includes elements that are "not transitory," such as housing, oil prices and wages.
"They're elevated for a while," Dimon said on a conference call with journalists. "And the Fed really needs to thread the needle... to slow down the growth in inflation a little bit without stopping the growth."
Some observers have criticized the Federal Reserve for waiting too long to shift course.
The US central bank has recently undertaken a sharp pivot on monetary policy, signaling interest rate hikes and a hastened tapering of stimulus after previously characterizing inflation as "transitory."
But Dimon declined to criticize the Fed, hearkening back to the challenges facing the economy at the outset of the pandemic in March 2020 when unemployment stood at 15 percent.
He said aggressive steps by the central bank had prevented the crisis from mushrooming into a depression.
"I think the government did all the right things early on," Dimon said, adding that criticism is always easier "in hindsight."
JPMorgan Chase reported a dip in quarterly earnings on higher costs, but results were boosted by an improving macroeconomy that reduced the need for reserves in case of bad loans Photo: GETTY IMAGES NORTH AMERICA via AFP / SPENCER PLATT
Earnings came in at $10.4 billion, down 14 percent from the year-ago period. Revenues were flat at $29.3 billion.
For all of 2021, earnings were up 66 percent to $48.3 billion. Revenues rose one percent to $121.6 billion.
The fourth-quarter results included $1.8 billion in net reserve releases from funds that were set aside earlier in the pandemic in case of bad loans.
Strong points in the report included higher investment banking fees tied to what Dimon called "unprecedented" merger and acquisition activity offset somewhat by a drop in trading revenues in some businesses.
Dimon cited "exceptionally low" charge offs as a sign of a broadly solid economy.
But costs in consumer and community banking -- the biggest division -- were "driven by increased compensation, technology and marketing expense as we continue to invest in and grow the business," the bank said.
"The economy continues to do quite well despite headwinds related to the Omicron variant, inflation and supply chain bottlenecks," Dimon said.
"We remain optimistic on US economic growth as business sentiment is upbeat and consumers are benefiting from job and wage growth."
Shares fell 4.4 percent to $160.80 in pre-market trading.
