JPMorgan CEO warns of “unprecedented” economic risks ahead from Russia-Ukraine war

Russia’s invasion of Ukraine and penalizing sanctions in opposition to Moscow have roiled monetary markets and wreaked havoc on international provide chains. And JPMorgan CEO Jamie Dimon thinks the worst is but to return.

Dimon warned in his closely-read annual letter to shareholders on Monday that Russia’s ongoing invasion of Ukraine is predicted to meaningfully sluggish the U.S. and international financial system.

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JPMorgan economists predict penalties from the war and ensuing sanctions in opposition to Russia will scale back the nation’s gross home product (GDP) by as a lot as 12.5% by the center of this yr. The potential spillover results have additionally led the financial institution to chop its forecast for the remaining of Europe, with their GDP projections now at an annual fee of 2% in 2022, in comparison with the tempo of 4.5% economists had anticipated simply six weeks in the past.

In the meantime, JPMorgan estimates the U.S. financial system will advance roughly 2.5%, in comparison with the establishment’s preliminary forecast of 3% — however Dimon cautioned within the letter that forecasts had been based mostly upon a “pretty static view” of the war.

“We have no idea what its final result finally can be, however the hostilities in Ukraine and the sanctions on Russia are already having a considerable economic impression,” stated Dimon, including that “many extra” sanctions could possibly be added and spur additional unpredictability.

JP Morgan CEO Jamie Dimon listens as he’s launched on the Boston Faculty Chief Executives Membership luncheon in Boston, Massachusetts, U.S., November 23, 2021. REUTERS/Brian Snyder

“Together with the unpredictability of war itself and the uncertainty surrounding international commodity provide chains, this makes for a probably explosive state of affairs,” he added.

Furthermore, Dimon additionally warned the financial institution itself is positioned to lose as a lot as $1 billion over time within the first-ever remark JPMorgan has revamped its potential losses from the war. Though the most important financial institution stated it isn’t fearful about its direct publicity to Russia, the establishment is anxious concerning the “secondary and collateral results” the disaster and sanctions pose on so many firms and international locations.

Dimon didn’t elaborate on a precise time-frame or how the estimate was calculated, however a spokesperson for JPMorgan advised Yahoo Finance the $1 billion loss could possibly be associated to potential distressed property impacted by the war.

The financial institution earned $48.3 billion in revenue on income of $125.3 billion final yr.

“America should be prepared for the chance of an prolonged war in Ukraine with unpredictable outcomes,” he wrote. “We should always put together for the worst and hope for the most effective.”

The battle in Jap Europe is just one of a number of headwinds clouding the worldwide economic image, in response to Dimon. The “confluence” of the war, the stimulus-fueled restoration from the COVID-19 pandemic, central banks shortly shifting ahead to lift rates of interest and the reversal of quantitative easing “could dramatically enhance the risks ahead,” he stated.

“We face challenges at each flip: a pandemic, unprecedented authorities actions, a powerful restoration after a pointy and deep international recession, a extremely polarized U.S. election, mounting inflation, a war in Ukraine and dramatic economic sanctions in opposition to Russia,” Dimon wrote. “Whereas all this turmoil has severe ramifications on our firm, its impact on the world — with the intense struggling of the Ukrainian individuals and the potential restructuring of the worldwide order — is way extra vital.”

Alexandra Semenova is a reporter for Yahoo Finance. Comply with her on Twitter @alexandraandnyc

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