JPMorgan Chase CEO Jamie Dimon said Tuesday that the bank will likely boost its credit reserves again this quarter (after adding $7 billion in Q1) as it continues to brace for a massive uptick in loan losses caused by the coronavirus recession.
After disclosing that his bank will shore up credit reserves in the second quarter, Dimon, speaking at a financial services conference, said he expects other banks to do the same in an effort to offset losses down the road, Reuters reported.
Banks have already been hit hard by the coronavirus, with the five biggest U.S. banks seeing double-digit profit losses during the first quarter; JPMorgan’s profit dropped nearly 70% from a year earlier.
With unemployment above 14%, consumers and businesses alike are strapped for cash and in danger of defaulting on bank loans.
Dimon said he expects that JPMorgan will ease off building its reserves in the second half of the year as the unemployment rate falls and the economy begins to recover.
Dimon also said that JPMorgan is “very valuable” at its current valuation.
JPMorgan’s shares jumped 7.1% on Dimon’s comments; the bank reports second quarter earnings in July.
Last week, the IMF said that banks across nine advanced economies will suffer earnings challenges sharp declines in profits through 2025, and that “substantial action” will be needed to make up for earnings shortfalls caused by the coronavirus crisis.The IMF says these challenges will stem from loan losses and low interest rates, both of which will squeeze margins over the next several years, even though banks are more resilient now thanks to regulatory measures enacted after the financial crisis.
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