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JPMorgan braces for losses from ‘fairly severe’ recession

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Via Financial Times

JPMorgan Chase’s profits fell by 69 per cent in the first quarter as America’s biggest bank prepared for a “fairly severe recession” by dramatically ramping up loan loss provisions.

The bank reported net income of almost $2.9bn for the three months ended in March, down from about $9.2bn a year earlier. Earnings per share of 78c were far worse than the $1.76 predicted by analysts contributing to a Bloomberg poll. 

The fall in profits was primarily driven by a surge of almost $6.8bn in provisions for loan losses, which chief executive Jamie Dimon attributed to “the likelihood of a fairly severe recession”. Total loan provisions came in at $8.3bn for the first quarter of 2020, the highest since 2009 during the global financial crisis. 

JPMorgan is known as one of the most conservative banks on Wall Street but the scale of the provisions sets a grim tone for the other big US banks reporting later this week. 

Still, Mr Dimon said his bank “performed well in what was a very tough and unique operating environment — growing deposits in every line of business and providing loans as we extended credit and served as a port in the storm for our clients and customers”. 

The bank was flooded with an extra $270bn of deposits in the fourth quarter, taking total deposits to $1.84tn. 

Investment banking revenue fell 49 per cent year on year, to $886m, mostly because of $820m of writedowns on bridge loans.

Markets revenues of $7.2bn were up 32 per cent, far higher than the “mid teens” rise investment bank boss Daniel Pinto pointed to in late February, as “strong client activity” drove a 34 per cent rise in fixed income trading while a derivatives boom helped equities revenues to rise 28 per cent. 

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JPMorgan’s net interest income was stable for the year, despite lower interest rates.

Shares were under 1 per cent higher in pre-market trading at $99.05, in line with the rise in the S&P 500 futures index.

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