JP Morgan profits plunge by 69 per cent

US BANKING titan JP Morgan is preparing for a ‘fairly severe recession’ after its profits plunged 69pc in the first three months of this year.

America’s biggest bank said it had been building up its reserves to prepare for the coronavirus crisis, putting £5.4bn aside to cover loans it thinks customers might become unable to pay back.

Most of this fell into its credit card division. The increase in reserves, to £6.6bn, means JP Morgan’s loss provisions are now at their highest level since 2009, when the US economy was still floundering in the wake of the financial crisis. Profits at JP Morgan for January to March were just £2.3bn, down from £7.3bn a year earlier. The bank’s chief executive Jamie Dimon (pictured), who is still recovering from heart surgery following an emergency operation last month, said: ‘In the first quarter, the underlying results were extremely good.

‘However given the likelihood of a fairly severe recession, it was necessary to build credit reserves of $6.8bn resulting in total credit costs of $8.3bn for the quarter.

‘The first quarter delivered some unprecedented challenges and required us to focus on what we as a bank could do, outside of our ordinary course of business, to remain strong, resilient and well-positioned to support all of our stakeholders.’

Investors were disappointed by the bank’s earnings per share, or how much profit it made for each share. At just 62p, this was well below the 140p which analysts had predicted.

The sentiment was echoed at Wells Fargo, another major US bank which was reporting its first-quarter results yesterday.

The lender said its profits tumbled by 89pc to £519m, as it set aside an extra £2.5bn to cover losses on loans.

Like its larger rival, Wells Fargo also ‘forecasted credit deterioration due to the Covid-19 pandemic’.

Shares in JP Morgan slid 3.5pc, while Wells Fargo slumped by 5.1pc.