JPMorgan Chase is setting aside billions of dollars to cover potential losses tied to the coronavirus pandemic. Its CEO, Jamie Dimon, said the move was necessary "given the likelihood of a fairly severe recession."
Chase, the nation's largest bank by assets, on Tuesday became among the first of the nation's big companies to report how the coronavirus pandemic is impacting its business. First-quarter profit plunged by 69% from a year ago.
The bank is now facing billions of dollars in losses, as borrowers who were in fine financial shape just weeks ago are now at risk of going broke because the pandemic has shut down businesses across the country and put millions of Americans out of work.
JPMorgan's profits in the first quarter nearly evaporated due to a substantial increase in credit-loss provisions — that's money the bank has to set aside to cover potentially bad loans. That figure jumped from $1.5 billion last year to $8.29 billion last quarter.
JPMorgan "showed its ability to digest adverse impacts, while re-emphasizing caution about recessionary conditions," analysts at Jefferies said on Tuesday.
The last time JPMorgan had to set aside that amount of money to cover potentially bad loans was the first quarter of 2009 — in the depths of the Great Recession.
Overall the bank reported a profit of $2.87 billion, or 78 cents per share, down from a profit of $9.18 billion in the same period a year earlier. The results missed estimates, but analysts had struggled for weeks to figure out how to measure the coronavirus's impact on companies like JPMorgan and the estimates varied wildly.
Also on Tuesday, Johnson & Johnson said it was cutting its profit expectations for the year as the coronavirus disrupts economies worldwide. Medical procedures, hospital and doctor visits in particular have been upended by the outbreak and Johnson & Johnson is the first major U.S. drug and medical supply company to post quarterly earnings.