JPMorgan Chase on Energy Reserve Builds
- The provision for credit losses was $1.3 billion, up 49%, due to reserve increases in the current quarter versus reserve releases in the prior year quarter, partially offset by lower net charge-offs. The reserve increases in the current quarter reflected an increase in wholesale reserves of $185 million, driven by downgrades, including $124 million in the Oil & Gas portfolio and $35 million in Metals/Mining.
Prior Commentary
- Energy Exposure- Approx $43 bln;
- Fox Business News Maria Bartiromo tweeted yesterday that JPM's Jamie Dimon said that if oil stays were it is then the bank will need to increase reserves by $500 mln.
- For a comparison Citigroup (C) has approx $60 bln in exposure to energy loans and has said it would need to increase reserves by $400 mln.
Q3 Impact
- Net reserve release of $281 million pre-tax, which reflected a little less than $600 million of consumer reserve releases as favorable credit trends continue; offsetby a build of a little over $300 million in wholesale, approximately $160 million of which is additional reserves associated with the oil and gas sector, given expectations that energy prices will remain lower for longer.
- "So if energy prices stay around these levels and recover slowly, we're expecting net not to have a material incremental reserve in the next quarter".