JPMorgan Expects 2020 Earnings to Decline, May Scrap Dividend

Zacks Equity Research

JPMorgan’s JPM CEO Jamie Dimon has warned that earnings will decline “meaningfully” in 2020 from last year’s $36.4 billion, given the lingering effects of coronavirus-related slowdown. At the same time, in his annual letter to shareholders, Dimon noted that the biggest bank in the United States is currently strong enough to withstand the after effects of the current crisis.

In mid-March, JPMorgan along with seven other major banks including Bank of America BAC, Citigroup C, Goldman Sachs and Morgan Stanley MS had suspended share repurchases through second-quarter 2020, following the “unprecedented challenge” owing to the coronavirus pandemic.

Further, Dimon, in his letter, stated that in case the U.S. GDP declines 35% in second-quarter 2020 and unemployment rate increases to 14% in the fourth quarter (in the extremely adverse scenario), the company might think of suspending dividend payments. He said, “If the Board suspended the dividend, it would be out of extreme prudence and based upon continued uncertainty over what the next few years will bring.”

Even under such a scenario, the company is expected to continue lending to clients, given its strong liquidity position. Dimon stated, “We have over $500 billion in total liquid assets and an incremental $300+ billion borrowing capacity at the Federal Reserve and Federal Home Loan Banks, if needed, to support these loans, as well as meet our liquidity requirements.”

JPMorgan has already provided $950 million in new loans to small businesses over the past 60 days. Further, the bank is waiving and refunding fees for businesses that are in need, and finding ways to support additional small businesses “through resources available at the Small Business Administration.”

Notably, the company intends to provide details about the impact of this crisis on its financials during the first-quarter 2020 earnings release. The results are slated to be announced on Apr 14.

Shares of this Zacks Rank #3 (Hold) company have lost 35.9% so far this year compared with the industry’s 45.1% decline. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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