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JPMorgan Chase said Thursday that second-quarter profit slumped as the bank built reserves for bad loans by $428 million and suspended share buybacks.

The actions reflect Chairman and CEO Jamie Dimon’s cautious stance.

“The U.S. economy continues to grow and both the job market and consumer spending, and their ability to spend, remain healthy,” he said in the release.

“But geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices are very likely to have negative consequences on the global economy sometime down the road,” he warned.

With this outlook, the bank has opted to “temporarily” suspend its share repurchases to help it reach regulatory capital requirements, a prospect feared by analysts earlier this year. Last month, the bank was forced to keep its dividend unchanged while rivals boosted their payouts.

Shares of the bank fell 2.5% in premarket trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $2.76 vs. $2.88 expected
  • Managed revenue: $31.63 billion vs. $31.95 billion expected

Profit declined 28% from a year earlier to $8.65 billion, or $2.76 a share, driven largely by the reserve build, New York-based JPMorgan said in a statement. A year ago, the bank benefited from a reserve release of $3 billion.

Managed revenue edged up 1% to $31.63 billion, helped by the tailwind of higher interest rates, but was still below analysts’ expectations, according to a Refinitiv survey.

JPMorgan, the biggest U.S. bank by assets, is closely watched for clues on how the banking industry fared during a quarter marked by conflicting trends. On the one hand, unemployment levels remained low, meaning consumers and businesses should have little difficulty repaying loans. Rising interest rates and loan growth mean that banks’ core lending activity is becoming more profitable. And volatility in financial markets has been a boon to fixed income traders.

But analysts have begun slashing earnings estimates for the sector on concern about a looming recession, and most big bank stocks have sunk to 52-week lows in recent weeks. Revenue from capital markets activities and mortgages has fallen sharply, and firms could disclose fresh writedowns amid the broad decline in financial assets.

Importantly, a key tailwind the industry enjoyed a year ago — reserve releases as loans performed better than expected — has begun to reverse as banks are forced to set aside money for potential defaults as the risk of recession rises.

Back in April, JPMorgan was first among the banks to begin setting aside funds for loan losses, booking a $902 million charge for building credit reserves in the quarter. That aligned with the more cautious outlook Dimon has been expressing. In early June he warned an economic “hurricane” was on its way.

Given this outlook, bank analysts may ask if management can adjust expenses lower in reaction to the business environment.

One tailwind the company has is rising U.S. rates. JPMorgan said at the firm’s investor day in May that it could achieve a key target of 17% returns this year, earlier than expected. In fact, the bank hit that level this quarter.

Shares of JPMorgan have dropped 29% this year through Wednesday, worse than the 19% decline of the KBW Bank Index.

Morgan Stanley also reported earnings Thursday and like JPMorgan, its results were shy of Wall Street’s expectations. The bank was hurt by a drop investment banking revenue.

Wells Fargo and Citigroup are expected to post their results on Friday and Bank of America and Goldman Sachs are slated for Monday.

This story is developing. Please check back for updates.