US banking giant JP Morgan sets aside more money to cover loan defaults as rising interest rates put borrowers under pressure
US banking giant JP Morgan has set aside more money to cover loan defaults as rising interest rates put pressure on borrowers.
It came as second-quarter earnings jumped two-thirds as it brought in more money from interest payments on loans. Loan loss provisions – the amount set aside to compensate for bad debts – rose from £839m in the same period last year to almost £2.2bn.
About £915 million of that was due to the bailout of California lender First Republic, which collapsed in May amid a crisis triggered by the bankruptcy of Silicon Valley Bank.
Despite the increased provision, JP Morgan reported a ‘bargain’ for First Republic of £2.1bn, with profits up 67 per cent to £11bn over the quarter, while revenues rose 34 per cent to £31.5bn.
But the Markets division’s revenues fell 10 percent to £5.3 billion as stock traders remained skittish about the outlook.
‘Strong results’: Second-quarter profit jumped two-thirds as JP Morgan raised more money from interest payments on loans
JP Morgan boss Jamie Dimon praised “strong results” but warned of risks to the US economy.
He noted that consumers were “slowly using up their cash buffers” and that “stubbornly high” core inflation increases the risk of interest rates rising and staying there longer.
Several Wall Street financiers have called for Dimon to run for the US presidency next year, but he brushed off the rumors as he said he would consider serving in government.
JP Morgan’s results contrasted sharply with Citigroup’s, where profits for the quarter fell 36 percent to £2.2 billion as higher interest rates failed to offset a drop in trading income.