Business

JPMorgan Chase sets aside more than $10 billion to weather the pandemic

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Published July 14, 2020
Updated July 15, 2020, 2:11 a.m. ET

The markets might be weathering the storm, but JPMorgan Chase is building an ark.

The megabank’s second-quarter profits plunged by more than half as it set aside a staggering $10.5 billion to absorb future loan losses related to the coronavirus pandemic.

JPMorgan’s net income of $4.7 billion was 51 percent lower than last year’s $9.7 billion even though it posted net revenue almost $3.5 billion higher than the second quarter of 2019.

Nevertheless, earnings per share came in at $1.38, which exceeded the analyst estimate of $1.04. That bright spot appeared driven by the bank’s trading performance, which saw a 79 percent jump thanks to the frothy markets, with fixed-income trading alone up 99 percent.

CEO Jamie Dimon struck a cautious tone Tuesday morning in announcing the results, which exposed the jarring disconnect on Wall Street of late, with markets booming despite persistent anxiety about the economy.

“Despite some recent positive macroeconomic data and significant, decisive government action, we still face much uncertainty regarding the future path of the economy,” Dimon wrote in a statement. “However, we are prepared for all eventualities as our fortress balance sheet allows us to remain a port in the storm.”

The nation’s largest lender set aside just over $1.1 billion in credit provisions in July 2019. But this year, Dimon and his team are clearly bracing for the worst amid soaring unemployment and an increasingly uncertain recovery from the coronavirus pandemic.

“This is not a normal recession,” Dimon told reporters on a conference call. “Consumer incomes are up, savings are up, and home prices — for the most part — are up. The recessionary part of this, you are going to see down the road.”

That view appears to be a shift from Dimon’s prediction in April, when he told media and analysts that JPMorgan foresaw a big bounce back in the second half of 2020.

Dimon also struck a wary tone on markets, telling reporters that he sees stocks coming back to earth: “Trading will revert to more normal numbers going forward. Markets will start to reflect [everything that’s going on].”

Dimon also commented on the madcap volatility in trading, musing, “We just saw the biggest downturn the world has ever seen … and then we saw the biggest upturn the world has ever seen.”