J.P. Morgan’s Dimon: Credit Trends Are Normalizing, but No Signs of Near-Term Recession

Low-income consumers may be pulling back, and high-income consumers may wind up spending their excess funds by the end of the year.

However, J.P. Morgan CEO Jamie Dimon said in an interview Wednesday (Aug. 7) with CNBC that even as credit trends are normalizing, a near-term recession does not look like it’s in the cards.

Asked about the fact that just a few months ago the market was “pricing in” a soft landing at about a 70% probability — and Dimon’s own estimation was about half that — the CEO said the 35% to 45% likelihood of that soft landing is still “about the same,” while contending that there remains the possibility of “a large range of outcomes.”

Beyond the uncertainties tied to geopolitics and deficit spending, among other factors, he said he remains “a little bit of a skeptic” when it comes to the possibility of inflation getting back to 2%.

Dimon noted during the conversation — amid a continuing bus tour where he has been traveling in the Midwest — that the company’s branch strategy is one where there will be a branch within a 15- to 20-minute drive for half of the country’s population, serving a greater segment of rural communities. The banking colossus is adding 500 branches through the next few years.

Several of the biggest banks in the United States have been adding branches and plan to do so through the next several years, upgrading existing locations and allowing for digital activities to be part of the in-store experience.

The PYMNTS Intelligence report “Banking’s Evolution From Digital-Plus-Physical to Digital-Everywhere” found that more than a quarter of banking customers prefer to meet their servicing needs at a branch, and half of customers prefer to visit branches for sensitive or complex needs, such as fraud or financial advice.

Dimon said the bus tour is offering evidence that “America is alive and well.”

Insights on the Consumer

Amid the $2 billion in credit-related charge-offs J.P. Morgan took in its last quarter, Dimon said that credit trends are normalizing. That normalization comes after billions of dollars in pandemic-era aid and loans helped beef up checking and other accounts at banks, specifically for the bottom half of households, based on income levels. The top half of households may see those excess funds depleted by the end of the year.

However, consumers and the economy are resilient, Dimon told CNBC, as stocks are still high, jobs are still “plentiful,” and credit data does not point to a recession. Dimon’s comments echoed some of Chief Financial Officer Jeremy Barnum’s observations on the latest earnings call in July that credit trends are normalizing and not deteriorating.

However, that doesn’t mean the trends “can’t get worse from here,” Dimon said during the Wednesday interview.