JPMorgan Chase: More stimulus needed to avoid defaults

JPMorgan Chase borrowers are hanging on, but more stimulus is needed to help them weather the coronavirus pandemic.

As the company with $ 3.4 trillion in assets released $ 2.9 billion in loan loss reserves in the fourth quarter, allowing it to record a negative allowance, executives warned that many uncertainties remained about credit quality. The publication largely reflected an improved outlook for commercial loans and mortgages; allowances for credit cards and auto loans were not affected.

Vaccines and new stimulus packages are promising, but their overall benefit to the economy remains uncertain.

Jamie Dimon, CEO of JPMorgan, said on an earnings call Friday that he supports the $ 1.9 trillion stimulus package put forward by President-elect Joe Biden.

” We support [the plan] not because it’s good for the bank, but because it’s good for American citizens, ”Dimon said.

“I hope that by the summer you could have a very healthy economy,” he added. “Next year the focus will be on debt and deficit, but let’s move on now.”

Additional stimulus could help avoid the New York banking giant’s credit problems.

“The bridge has been strong enough,” CFO Jennifer Piepszak said of existing relief efforts. “The question remains: is it long enough? “

Loan losses are not expected to increase “significantly” until the end of 2021, and the stimulus package signed last month could keep problems at bay even longer, Piepszak said on a call with reporters.

Nonperforming assets fell 5% in the fourth quarter from the previous quarter to $ 10.9 billion, and the allowance for loan losses was $ 30.7 billion as of December 31. About $ 24 billion in consumer loans remain on hold, down 17% from the third quarter and about half the amount reported over the summer.

Net write-offs fell 11% to approximately $ 1.1 billion. About 90% of cardholders who have left one of the company’s deferral programs are up to date with their payments.

JPMorgan’s profit, helped by the negative provision, increased 29% from the prior quarter to $ 12.1 billion. Earnings per share of $ 3.79 was $ 1.17 higher than the average analyst estimate tracked by FactSet Research Systems.

The negative disposition was notable, industry watchers said.

Jason Goldberg, analyst at Barclays Capital, wrote in a note to clients that he expected another provision in the quarter, while Brian Kleinhanzl at Keefe, Bruyette & Woods had forecast a much lower reserve release.

“Overall, the fundamentals are improving,” Kleinhanzl said.

While taking an optimistic note on credit quality, JPMorgan executives were more restrained in their comments on loan demand. Total loans increased 2.3% from the previous quarter to $ 1,000 billion, reversing two consecutive quarters of decline.

Credit card balances increased 2.7% to $ 144 billion, while commercial loans increased 4.3% to $ 550 billion. These gains were partially offset by a 1.1% drop in other consumer loans to $ 319 billion.

Demand for loans is not expected to pick up in 2021, Piepszak said.

JPMorgan plans to open more branches in certain markets to boost business. It aims to open 150 branches this year – after opening 90 in 2020.

True, the company has closed more branches than it has opened, with a net reduction of 68 locations last year.

The value of the new offices was “extraordinary and underestimated,” Piepszak said. “We are optimistic that the strategy will pay off.”

“We still have nearly a million people per day visiting branches,” added Dimon.

While last year’s openings were concentrated in major cities such as Boston, Philadelphia and Washington, Dimon said the company is now considering new markets like North Dakota.

“The second I get the right, I’m on my way to Bismarck or Fargo,” Dimon said.

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