JPMorgan Chase is preparing for a severe recession by setting aside $6.8 billion to cover losses due to the expected wave of loan defaults by consumers and companies as the U.S. economy reels from the coronavirus shutdown.
The U.S. investment bank saw profits plummet 69 percent in the first quarter of 2020.
The coronavirus outbreak slammed the breaks on the world’s biggest economy in the first three months of the year as the viral disease spread from China to the rest of the world.
The disease has shut down businesses across the country and put millions of Americans out of work.
The country’s largest bank by assets and top credit card issuers, JPMorgan, is faced with the possibility of massive defaults from customers who have lost their jobs and cannot afford to service their loans.
The bank, whose profit fell to $2.87 billion in the first quarter from $9.18 billion in the same period a year earlier, also recorded loan losses in its wholesale lending division from the oil and gas industry and businesses that directly deal with U.S. consumers, such as retailers.
The JPMorgan CEO Jamie Dimon described the first quarter as an unprecedented challenge in the bank’s earnings release but noted that despite the loan reserve, the bank had a fairly decent first quarter, and it remains in a strong financial position.
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“The company entered this crisis in a position of strength, and we remain well-capitalized and highly liquid,” Dimon said, adding that the bank has $1 trillion of liquidity resources.