What America’s CEOs are saying on inflation: We’re going to charge you more

In this photo illustration, hands are seen counting US $100 bills.
In this photo illustration, hands are seen counting $100 bills.

  • Inflation, or increased pricing for goods, is on the rise as the economy reopens.
  • Biden’s administration and the Fed says the price increases should be temporary.
  • But CEOs of major companies are saying that higher prices could persist.
  • See more stories on Insider’s business page.

The country is reopening and the economy is recovering from the pandemic, and while COVID-19 cases are down, prices for goods and services are on the rise. President Joe Biden’s administration says this phenomenon, known as inflation, is not a cause for concern, but CEOs of major companies are warning that they’ll probably keep raising prices.

The Bureau of Labor Statistics’ monthly Consumer Price Index release showed that inflation in June was much higher than expected, with prices surging 0.9% over May, the highest month-over-month inflation rate since April 2008’s 1.0% increase. It was fueled by big price increases for used cars, beef, and pork, and the government insists it should cool down soon.

Labor Secretary Marty Walsh told Insider in early July that he’s not worried about the increase in prices for goods, especially given that wages also increased in June.

“The one thing that we are not concerned about is … inflation,” Walsh told Insider. “We’re still in transition, so we’re not concerned about that. So I think anytime we can push for higher wages – and the president’s been very vocal on this – that’s a good thing for people.”

Treasury Secretary Janet Yellen said in May that the high prices should only last through the end of this year, and Biden said during a June press conference that the “overwhelming consensus” is that inflation should “pop up a little bit and then come back down” – similar to the consensus from America’s central bank, led by Federal Reserve Chair Jerome Powell.

The economics field is not close to that consensus. Former Treasury Secretary Larry Summers has pointed to Biden’s $1.9 trillion stimulus as the “least responsible” fiscal policy in 40 years, one that could potentially trigger the dreaded hyperinflation. Increasingly, executives are saying that price increases are here to stay. Here’s what else they’re saying:

JPMorgan Chase CEO Jamie Dimon

JPMorgan CEO Jamie Dimon.
JPMorgan CEO Jamie Dimon.

JPMorgan Chase CEO Jamie Dimon said during an earnings call on July 13 that inflation “could be worse than people think.”

“I think it’ll be a little bit worse than what the Fed thinks,” Dimon said. “I don’t think it’s only temporary.”

In June, Insider reported that Dimon said the bank was stockpiling $500 billion in cash in anticipation of higher inflation, during which he expressed the same concerns with the nature of inflation, in that it will be more persistent than what people are saying.

JPMorgan did not immediately respond to Insider’s request for comment.

 

BlackRock CEO Larry Fink

GettyImages 480950078

Larry Fink, the CEO of investment management corporation BlackRock, reiterated Dimon’s concerns on the nature of inflation in a CNBC interview on July 14.

“[Policymakers] are saying jobs are more important than consumerism,” Fink said. “That is going to probably lead to systematically more inflation.”

Biden has consistently touted job growth as a primary achievement of his administration so far, and Republican lawmakers have even cut off unemployment benefits early in an effort to incentivize people to return to work.

But Fink said that move takes the focus away from consumers, causing large-scale price increases.

“I’m hearing from every CEO that they have huge price increases, and they’re passing them on across the board, here in the United States and in Europe,” Fink said.

BlackRock did not immediately respond to Insider’s request for comment.

PepsiCo CFO Hugh Johnston

FILE PHOTO: Bottles of Pepsi are pictured at a grocery store in Pasadena, California, U.S., July 11, 2017.   REUTERS/Mario Anzuoni/File Photo
FILE PHOTO: Bottles of Pepsi are pictured at a grocery store in Pasadena

To help counter the effects of inflation, some business leaders are explicitly saying they’re raising prices for their goods on consumers. PepsiCo’s CFO Hugh Johnston is one of them.

“Is there somewhat more inflationary pressures out there? There is,”  Johnston said on an earnings call on July 13. “Are we going to be pricing to deal with it? We certainly are.”

The CEO of industrial supplies company Holden Lewis echoed Johnston on an earnings call the same day, saying that “based on what cost is doing,” the company will have to increase prices on consumers.

Lewis said, though, that a previous price increase the company made was received “fairly well,” suggesting consumers might not be discouraged by increased prices. 

Pepsi did not immediately respond to Insider’s request for comment.

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JPMorgan beats estimates again in the 2nd quarter amid record quarter for investment banking

GettyImages 1171045638
JPMorgan CEO Jamie Dimon.

  • JPMorgan beat estimates once again in the second quarter, with earnings per share of $3.78.
  • The bank’s investment banking arm posted record numbers, and the firm also received a $2.3 billion boost by reclaiming money that had been set aside to cover bad loans.
  • JPMorgan boss Jamie Dimon said customers and clients were faring well as the economy reopened.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

JPMorgan again beat expectations with its second-quarter earnings, as the banking giant benefited from record investment-banking fees and the release of cash set aside to cover loan losses.

The lender’s revenue came in at $31.4 billion, it earnings showed on Tuesday. That was above the $29.9 billion analysts had been expecting but down from $33.8 billion in the same quarter a year earlier.

Net income stood at $11.9 billion in the second quarter, boosted by the release of $3 billion that had been put aside to cover bad loans, which added $2.3 billion to the bottom line after charge-offs. Net income was up 155% from $4.7 billion a year earlier.

Earnings per share came in at $3.78, above expectations of $3.21 and up 174% from the same quarter in 2020.

Here are the key numbers:

  • Earnings per share: $3.78 vs. $3.21 expected.
  • Revenue: $31.4 billion vs. $29.9 billion expected.

“JPMorgan Chase delivered solid performance across our businesses,” said Chairman and CEO Jamie Dimon.

“This quarter we once again benefited from a significant reserve release as the environment continues to improve… Consumer and wholesale balance sheets remain exceptionally strong.”

Read more: UBS names 6 bank stocks to buy as successful stress tests open the door to buybacks and dividends – and highlights 2 laggards to avoid

The Wall Street lender, the biggest in the US by assets, is seen as a bellwether company whose earnings give a sense of the health of the economy. Its results on Tuesday showed how banks are benefitting from rapid economic growth which has made much of the money they set aside in 2020 to cover bad coronavirus loans redundant.

JPMorgan’s earnings also showed that its investment banking arm fared well in the second quarter despite quieter markets. Investment banking fees rose 25% year on year to a record high of $3.6 billion, largely driven by the boom in mergers and acquisitions.

The bank’s stock was down 0.63% in pre-market trading after the earnings were released, at $157.00. It has risen more than 20% in 2021 as so-called cyclical stocks have benefited from a lifting of coronavirus restrictions and strong economic outlook.

Read the original article on Business Insider

JPMorgan’s Q1 earnings smash estimates with a 14% jump in net revenue boosted by its investment bank

JPMorgan CEO Jamie Dimon
JPMorgan CEO, Jamie Dimon.


JPMorgan, the top US bank by assets, reported first-quarter earnings on Wednesday, beating consensus estimates of analysts polled by Bloomberg on strong trading revenue.

It is the first major bank to report results this quarter, paving the way to offer a look at how banking businesses are faring alongside progress in COVID-19 vaccinations.

The bank’s net revenue came in at $33 billion, up 14% from a year ago, driven by its performance in the corporate and investment-banking division.

“JPMorgan Chase earned $14.3 billion in net income reflecting strong underlying performance across our businesses, partially driven by a rapidly improving economy,” CEO Jamie Dimon said in a statement.

“With all of the stimulus spending, potential infrastructure spending, continued Quantitative Easing, strong consumer and business balance sheets and euphoria around the potential end of the pandemic, we believe that the economy has the potential to have extremely robust, multi-year growth.”

Here are the key numbers:

  • Net income: $14.3 billion versus $9 billion estimated
  • Earnings per share: $4.50 versus $3.13 estimated
  • Revenue: $33.1 billion versus $30.3 billion estimated

The jump in profit was partly driven by a release of loan loss reserves, in the amount of $5.2 billion this quarter. Last quarter, the bank released $2.9 billion in reserves.

The bank had set aside reserves of $26 billion in anticipation of a wave of loan defaults amid the coronavirus pandemic. Dimon said he believed the amount is “appropriate and prudent, all things considered.”

JPMorgan’s corporate and investment-banking divison was the standout performer, with a 46% jump in net revenue to $14.6 billion. Its robust performance was fuelled by a surge in deal-making as the bank advised on 126 deals worth about $208 billion in the first-quarter, according to GlobalData.

JPMorgan’s shares are up 21% since the start of this year.

Goldman Sachs and Wells Fargo are expected to report first-quarter results later on Wednesday.

Read the original article on Business Insider