JPMorgan Chief Executive Officer Jamie Dimon, speaking to employees in Hong Kong yesterday, said the company faces "highly challenging conditions'' next year. UBS of Zurich predicted today that "difficult conditions'' will continue to weigh on fee income. RBS, based in Edinburgh, scrapped a profit goal for 2008.
Banks have reported $687 billion of credit losses and write-downs since the start of last year as the worst U.S. housing slump since the Great Depression battered credit markets. UBS, RBS and New York-based JPMorgan, the bank called upon to rescue Bear Stearns Cos., have all been forced to take state funds as governments seek to restore confidence in the financial system.
UBS, the biggest Swiss bank, said worsened financial market conditions this quarter "will continue to affect our clients' assets, and therefore our fee-earning businesses.'' RBS CEO Stephen Hester said rising loan defaults and write-downs may lead to a full-year loss at Britain's second-largest bank.
"The global situation does not look good,'' said Peter Hahn, a fellow at London's Cass Business School and a former managing director at Citigroup Inc. "UBS is retrenching, RBS is unlikely to be in all of the same businesses going forward and JPMorgan has so far used the financial crisis as an opportunity to expand. We are seeing the financial excess being squeezed out of the financial services sector.''
Speaking to 550 employees in Hong Kong, Dimon also said there may be a "strong recovery'' in 2010, according to a person in attendance.The 52-year-old CEO predicted the acquisitions of Bear Stearns and Washington Mutual Inc., both victims of the credit crunch, will help JPMorgan's performance in the "longer term.'' JPMorgan spokesman Ray Bashford declined to comment.
Wall Street executives, including Merrill CEO John Thain and Citigroup Inc. Chief Financial Officer Gary Crittenden, have signaled economic contraction will weigh on profits into 2009. Dimon said last month he will set aside more money to cover loan losses and predicted the slowdown will last longer and strike deeper than many had previously expected.
JPMorgan, the largest U.S. bank by market value, posted an 84 percent drop in third-quarter profit, and Dimon forecast on Oct. 15 earnings will decline in coming quarters. The stock has lost 4.3 percent this year.