JPMorgan, Wells Fargo profits hit

WASHINGTON, DC: Earnings plunged at JPMorgan Chase and Wells Fargo Tuesday as both US banking giants set aside billions of dollars to cover loans vulnerable to the economic devastation from coronavirus shutdowns. Pointing to what Chief Executive Jamie Dimon called the “likelihood of a fairly severe recession,” JPMorgan booked reserves of nearly $8.3 billion, including a build of $6.8 billion in the first quarter.

Wells Fargo announced a reserve build of $3.3 billion. Like their counterparts at JPMorgan, Wells Fargo executives signaled the number could rise further. “If confidence does deteriorate and the shelters-in-place stay on for longer, it wouldn’t surprise me if the loss estimates would have to go up,”

Wells Fargo Chief Executive Charlie Scharf told analysts on a conference call.

“There’s more downside than upside given the uncertainty in this environment.”

The reserves led to staggering drops in firstquarter profits at both banks. Bank of America, Goldman Sachs and other large banks report later this week. Like other key US sectors, banks had enjoyed relatively prosperous conditions until government officials instituted a series of lockdown measures beginning in March to try to limit the spread of the coronavirus, shocking the economy and sending millions into unemployment.

Both banks are granting relief in the wake of downturn, with JPMorgan allowing a 90-day grace period on mortgage or credit card payments and Wells Fargo suspending property foreclosure sales.

But the reserves announced Tuesday reflect the banks’ current assessment of where they could suffer defaults as the economy struggles to find its footing.

Eyeing 20% unemployment JPMorgan Chief Financial Officer Jennifer Piepszak said the projections are a best guess in a cloudy landscape due to the uncertain evolution of the virus and the unknowable potential lift from US stimulus programs. “That’s absolutely the hardest thing to try to predict right now,” she said during a briefing with reporters, “the path of the virus and the path for the economy and when and how it reopens.”

JPMorgan’s economists currently project US unemployment will reach 20 percent in the second quarter before recovering in the latter half of the year, Piepszak said.

Dimon hopes the economy can be ramped up soon, but told analysts, “It won’t be May. You talk about June, July, August, something like that.” The biggest US bank by assets, JPMorgan reported profits of $2.9 billion for the quarter ending March 31, down 69 percent from the year-ago period. Revenue dipped three percent to $28.3 billion. —AFP