JPMorgan Chase has taken almost $10.5bn of loan loss charges in the second quarter as the biggest US lender warned of “uncertainty” ahead even as some indicators have pointed to a nascent economic recovery.
The loan loss charges, which included an increase in reserves for future soured loans of $8.9bn, left the bank with second quarter net income of $4.7bn or $1.38 per share. That was almost half what it earned a year earlier, but far better than the $3.3bn forecast by analysts in a Bloomberg poll.
Group-wide revenue rose 15 per cent to almost $33bn, which was also better than analysts’ predicted, after volatile markets drove trading revenues almost 80 per cent higher.
JPMorgan had already warned that its second quarter loan loss charges would be higher than the bumper $8.25bn it took in the first three months of the year, as banks across the US braced for a surge in defaults.
“Despite some recent positive macroeconomic data and significant, decisive government action, we still face much uncertainty regarding the future path of the economy,” said JPMorgan chief executive Jamie Dimon.
“We ended the quarter with massive loss-absorbing capacity . . . (and) with significant earnings power that would allow us to absorb even more credit reserves if needed,” he said. “This is why we can continue to serve all of our stakeholders and to pay our dividend — unless the economic situation deteriorates materially and significantly.”
JPMorgan’s investment bank was the standout performer. In late May, investment bank head Daniel Pinto said trading revenues could be up 50 per cent. Trading revenues were actually up 79 per cent, including a 99 per cent rise in fixed income revenues. Investment banking fees were up 54 per cent.
Shares in the bank rose almost 4 per cent in pre-market trading.