Investment bank JP Morgan Chase & Co has set aside $10.5bn (£8.38bn) of reserves to cover a potential surge of loan defaults due to the coronavirus pandemic as US cases of Covid-19 continued to rise.
The bank increased its provision for credit losses by $9.3bn compared to the previous year reflecting the “deterioration and increased uncertainty in the macroeconomic outlook” due to coronavirus.
JP Morgan also reported a 51 per cent drop in profit during the second quarter, a smaller fall than expected.
Net income fell to $4.69bn, or $1.38 per share, in the quarter to 30 June, topping lowered analyst forecasts of $1.04 per share.
The bank will also continue to pay out a dividend, chief executive Jamie Dimon said.
Dimon added: “We are fully committed to doing our part both in promoting the safety of our employees and customers and helping the economies of the world recover from the impact of the ongoing Covid-19 crisis, including helping to drive policies and programs for the benefit of all of society and create opportunity for those who have been left out of the economy for far too long.”
“My sense is what while the stock market does not reflect the real economy, and the JPM numbers reinforce this view, this is not a barrier to further gains,” Neil Wilson, chief market analyst at Markets.com, said.
“The vast amount of liquidity that has been injected into the financial system will keep stocks supported – the cash needs to find a home somewhere and bonds offer nothing.
“However there is clearly a risk that Main Street starts to bite at the ankles of Wall Street and results in another pullback like we saw in the second week of June.
“We should remember that there could be some very hard yards ahead for the US economy as states pause reopening – loan loss provisions may need to rise a lot more.”