Bad oil loans send JPMorgan’s profit falling

Dimon on the stresses of Wall Street

Not even JPMorgan Chase is immune to crashing oil prices.

The largest U.S. bank revealed a 7% drop in first-quarter profits on Wednesday, its first quarterly decline in earnings since the final quarter of 2014.

JPMorgan’s (JPM) profits were hurt by an 88% increase in provisions for credit losses, which totaled $1.8 billion last quarter. The Wall Street firm said that increase was fueled by the need to set aside more money to cover loans that are souring in the struggling commodities industry.

That included an increase of $529 million in the oil, natural gas and pipeline business and $162 million in metals and mining. Even though oil prices have rebounded recently, many U.S. oil companies are under enormous financial pressure with oil at $40 a barrel. U.S. bankruptcies spiked 379% last year. Those problems can create headaches for JPMorgan and other firms that bankrolled the U.S. oil boom.

Still, investors were fearing far worse news from JPMorgan amid big struggles in the overall banking sector. JPMorgan’s profit of $1.35 per share easily exceeded estimates, sending the stock nearly 3% higher in premarket trading.

Related: Jamie Dimon brags about how mighty JPMorgan is

JPMorgan, which is the first big U.S. bank to report first-quarter results, is also feeling the brunt of what CEO Jamie Dimon called “challenging markets.” The company’s revenue slipped 3% to $24.1 billion.

These struggles were highlighted by a 24% decline in investment banking revenue due to lower debt and underwriting fees. That makes sense since last quarter was a terrible one in the IPO market, with no tech firms going public for the first time since the Great Recession.

JPMorgan also said its markets revenue and fixed income revenue slumped last quarter, reflecting a broader industrywide slump.

The good news is that Dimon doesn’t see dark clouds on the horizon for U.S. consumers. He pointed to JPMorgan’s ability to grow loans and deposits “impressively.”

“The U.S. consumer remains healthy and consumer credit trends are favorable,” Dimon said.

comments powered by Disqus