DIMON OVER A BARREL
JPM leaks out $9B
On second thought, falling oil prices are a big headache for JPMorgan Chase Chief Executive Jamie Dimon.
The bank’s shares lost about $9 billion in value on Tuesday after Dimon said JPMorgan would have to increase its energy loan reserves by 60 percent, to $1.3 billion.
Last summer, with oil trading at about $55 a barrel, Dimon and Chief Financial Officer Marianne Lake dismissed suggestions that JPMorgan would need to pump up its reserves.
In fact, Dimon, talking about the bank’s secondquarter energypatch loan loss reserves, sought to assure investors that everything was okay.
“Those reserves do not mean we’re going to have losses,” Dimon added during a call back then.
But on Tuesday, with oil trading at below $32 a barrel — after the price had slumped to $27.10 earlier this year — Dimon was taking a bit more of a conservative approach.
Investors ran for the exits to avoid slipping on the slick that may form around the bank’s $44 billion of energy sector loans.
The bank’s shares fell 4.2 percent, to $56.11, Tuesday.
The low price of oil makes it harder for energy companies to pump enough cash to pay back their loans.
“We’ve only just begun to see the range of bankruptcies in oil and gas,” Doug Petno, JPMorgan’s commercial bank CEO, said during the bank’s investor day presentations.
In addition to having to announce increased reserves during the bank’s investor day —a kind of a stateofthebank presentation — Dimon had to deal with a resurfacing London Whale.
In a letter released to some media outlets, the Whale — Bruno Iksil, a Londonbased trader for JPMorgan — laid blame on his immediate superiors for his bad bets.
Those bad bets cost the bank $6 billion in trading losses and $1.1 billion in fines — and caused Dimon to lose half his annual bonus for 2012.
“My role was to execute a trading strategy that had been initiated, approved, mandated and monitored by the [chief investment office’s] senior management,” Iksil said in a letter to Reuters and other outlets.
In addition, JPMorgan’s sales and trading revenue has dropped 20 percent so far this year, compared with 2015, in part because of the global selloff in stocks, the bank said.