JPMorgan's profit plunges as credit costs spike on economic uncertainty
Posted July 14, 2020 7:21 a.m. EDT
CNN — JPMorgan Chase, the nation's largest bank, reported a 51% plunge in second-quarter profits as provisions for credit losses spiked and the shape of the recovery became increasingly uncertain.
Although JPMorgan's Main Street business has stumbled during this recession, the bank's trading division thrived as markets have sharply recovered from the crisis.
JPMorgan reported second-quarter profits of $4.7 billion, down from $9.7 billion a year ago. Yet per-share earnings only fell to $1.38, easily beating Wall Street's expectations. Revenue also topped estimates.
Jamie Dimon, JPMorgan's CEO, struck a cautious note about the road ahead.
"Despite some recent positive macroeconomic data and significant, decisive government action, we still face much uncertainty regarding the future path of the economy," Dimon said in a statement. "However, we are prepared for all eventualities as our fortress balance sheet allows us to remain a port in the storm.
JPMorgan said provisions for credit losses totaled $10.5 billion during the quarter, up from just $1.2 billion the year before. JPMorgan said the surging reserve builds "reflect further deterioration and increased uncertainty in the macro economic outlook as a result of the impact of Covid-19."
JPMorgan shares rallied 4% on the results. The shares have lost nearly one-third of their value this year.
Analysts have warned the results from banks will be "really ugly" because the industry is being slammed by a perfect storm of problems during the pandemic. Lenders are grappling with mass unemployment, surging bankruptcies and the uncertain health crisis. Plus, bank profits are shrinking because of extremely low interest rates.
Later this week, rivals Bank of America, Citigroup, Morgan Stanley and Goldman Sachs are all scheduled to report results. Wells Fargo is expected to suffer its first quarterly loss and first dividend cut since the Great Recession.
Although Main Street is struggling, Wall Street is enjoying a rapid recovery from the crisis. US companies raised a record $190 billion via stock sales during the second quarter, according to Dealogic. That surge of stock sales, highlighted by the IPOs of software firm ZoomInfo and grocery chain Albertsons, has led to a fee boom for investment banks.