JPMorgan shares fall 6% after CFO lowers guidance on 'headwinds’ including wage inflation

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JPMorgan Chase shares dipped Friday after the bank posted its smallest quarterly earnings beat in nearly two years and the lender's CFO lowered guidance on companywide returns.

Here are the numbers:

Higher-than-expected expenses drove a 14% decline in fourth quarter profit to $10.4 billion, while revenue was nearly unchanged at $30.35 billion. JPMorgan said in its release that it took a $1.8 billion net benefit from releasing reserves for loan losses that never materialized; without that 47 cent per share boost, earnings would have been $2.86 per share.

Shares of the bank dropped 6.2%.

CFO Jeremy Barnum told reporters on a conference call that management expected «headwinds» of higher expenses and moderating Wall Street revenue to cause the company's returns to dip from recent years. That means it's likely the bank will miss the firm's 17% target for returns on capital, he said.

«Over the next one to two years, we expect to earn modestly below that target as the headwinds likely exceed the tail winds,» Barnum said, adding that the goal is still valid over the «medium term.»

JPMorgan will see expenses climb 8% to about $77 billion in 2022, Barnum added, driven by «inflationary pressures» and $3.5 billion in investments.

When asked if a tight labor market was forcing JPMorgan to pay its personnel more, Barnum had this response: «It is true that labor markets are tight, that there's a little bit of labor inflation, and it's important for us to attract and retain the best talent and pay competitively according to performance.»

Nevertheless, the bank will benefit from the rising interest rates and loan growth that have attracted investors to the financial industry in recent months. Net interest income is