JPMorgan Chase is preparing for the possibility that customers ranging from credit card holders to oil companies could fail to pay back billions of dollars in loans as the economy reels from the coronavirus outbreak.
JPMorgan said Tuesday that first-quarter profit plunged nearly 70%, as it boosted its reserves for potentially bad loans by nearly $7 billion. The bank warned it could boost those reserves even further in the April-June period,
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The coronavirus outbreak has shut down businesses across the country and put millions of Americans out of work. Borrowers who were in fine shape just weeks ago are now struggling financially and at risk of defaulting on their loans. The Federal Reserve and the U.S. government are taking unprecedented steps to ensure credit markets can function and to get badly needs funds to households and small businesses.
JPMorgan CEO Jamie Dimon said it was necessary for the bank to set aside significant funds “given the likelihood of a fairly severe recession.” The last time JPMorgan had to increase the amount in reserve for bad loans to such a degree was the first quarter of 2009 — in the depths of the Great Recession.