NEW YORK–JPMorgan Chase reported its third-quarter profit rose 4%, but that wasn’t the biggest surprise in the numbers reported during a recession. Instead, the nation’s biggest bank set aside just $611 million for potential future loan losses, far less than expected and the $10.47 billion it booked in the second quarter, noted the New York Times.
Profit doubled from the second quarter.
The bank’s profit rose to $9.44 billion, or $2.92 a share, from $9.08 billion, or $2.68 a share, a year earlier. Analysts had expected $2.23 a share, according to FactSet.
“The smaller reserve build signals the bank believes it is prepared for the losses that will come,” the Times reported.
JPMorgan Chief Executive James Dimon offered a cautionary note, saying the bank’s better-than-expected results may be a temporary blip. A massive expansion of unemployment benefits and other government stimulus have buoyed U.S. consumers and business so far, but they need more assistance, he told the Times.
“A good, well-designed stimulus package will simply increase the chance we get better outcomes, but there is so much uncertainty we’re not saying that that’s definitive,” Dimon said on a call with reporters Tuesday morning.
An Extra $10 Billion
If the economy recovers apace, JPMorgan may have $10 billion more than it needs to cover soured loans, Dimon said during the call. In a double-dip recession, he said, the bank could need another $20 billion in reserves.
The bank’s forecast for the U.S. economy improved slightly, but it still expects unemployment to remain above 7% for all of 2021, the Times reported.
Citigroup also slowed the pace of its reserve build, setting aside $2.26 billion for potentially rising loan losses. That was down from more than $7 billion in the previous two quarters. Citigroup’s overall profit slumped 34%, with profit falling in both its consumer bank and investment bank, the Times stated.
Bank of America, the country’s second largest bank, said profits declined 16% in Q3 after it earned $4.88 billion during the quarter. BofA also set aside $1.39 billion in provisions for loan losses, far smaller than its earlier provision of $5.12 billion in the second quarter and $4.76 billion in the first quarter.