JP Morgan to book £762m loss on Russian assets

Wall Street giant JP Morgan may lose as much as $1bn (£762m) on its exposure to Russia, its chief Jamie Dimon warned today in his annual letter to shareholders.

The investment banking titan has been part of a concerted effort by the West’s biggest corporates to ditch Russian assets and pull out of the country in a bid to freeze Moscow out of the global business community.

As a result, companies are set to book heavy losses due to the value of their investments plummeting caused by a firesell of Russian assets.

“We are not worried about our direct exposure to Russia, though we could still lose about $1bn over time,” Dimon said in his closely watched yearly letter to shareholders.

“We are actively monitoring the impact of ongoing sanctions and Russia’s response, concerned as well about their secondary and collateral effects on so many companies and countries,” he added.

The Russian economy has been hobbled by a sweeping set of historic sanctions, including freezing a large proportion of the Russian central bank’s foreign reserves.

The rouble, Russia’s currency, initially plunged against the dollar in the immediate aftermath of the invasion. It has since recovered its losses.

“The fallout from the war and resulting sanctions to reduce Russia’s GDP by 12.5 per cent by mid-year,” Dimon said.

Dimon warned the spillover effects of Russia’s brutal invasion of Ukraine will clamp down on global economic growth this year as a result of the conflict sending energy prices higher.

Europe’s economy will grow two per cent this year, down from the 4.5 per cent JP Morgan forecasted previously.

The Continent is heavily reliant on Russian energy supplies, meaning higher oil and gas prices will weigh on industry-heavy countries in the bloc, such as Germany.

Markets should prepare for a faster than expected tightening in monetary policy by the US Federal Reserve.

“Persistent inflation will require rising interest rates and a massive but necessary shift in quantitative easing to quantitative tightening,” he said.

Prices are rising at the quickest pace in 40 years across the pond, with inflation hitting 7.9 per cent, prompting the Fed to hike rates 25 basis points at its last meeting, the first rise since 2018.

Most investors think Fed Chair Jerome Powell and co will send rates 50 basis points higher at its next meeting on 4 May, double the amount it tends to lift borrowing costs.