JPMor­gan Chase lifts re­serves for bad oil, me­tals loans

The Pak Banker - - FRONT PAGE -

JPMor­gan Chase said it is set­ting aside an ad­di­tional $600 mil­lion to cover po­ten­tial loan de­faults in the en­ergy and min­ing sec­tor and could re­serve an­other $1.5 bil­lion if con­di­tions worsen. The big­gest US bank by as­sets boosted its re­serves for bad oil and gas loans by $500 mil­lion in the first quar­ter of 2016, tak­ing the to­tal to $1.3 bil­lion, ac­cord­ing to a pre­sen­ta­tion by chief fi­nan­cial of­fi­cer Mar­i­anne Lake at an in­vestor day.

In min­ing, JPMor­gan boosted re­serves by $100 mil­lion, tak­ing the to­tal to $350 mil­lion. Lake said JPMor­gan could fur­ther boost its re­serves by as much as $1.5 bil­lion un­der a "stress sce­nario" in which the bench­mark US oil price trades at $25 a bar­rel for 18 months. JPMor­gan does not view this out­come as a base­line sce­nario, she said. The moves come as tum­bling com­mod­ity prices pres­sure the fi­nances of en­ergy and min­ing com­pa­nies. On Mon­day, Stan­dard & Poor's down­graded To­tal, Sta­toil and BP on Mon­day, say­ing cheap oil prices would weaken the fi­nan­cial strength of the three top Euro­pean oil com­pa­nies. Lake said JPMor­gan boosted the re­serves as the out­look wors­ened af­ter the end of 2015. "Sen­ti­ment has gen­er­ally got­ten worse," she said. JPMor­gan said its to­tal oil and gas lend­ing ex­po­sure stands at $44 bil­lion, with 57 per­cent ranked in­vest­ment grade.

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