Horrible oil loans send JPMorgan'south profit falling

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Source:   —  April 13, 2016, at 4:26 PM

Not even JPMorgan Chase is immune to crashing oil prices.

Horrible oil loans send JPMorgan'south profit falling

Not even JPMorgan Chase is immune to crashing oil prices.

The largest U. S. bank revealed a seven percent drop in first-quarter profits on Wednesday, its first quarterly decline in earnings since the final quarter of two thousand fourteen.

JPMorgan's (JPM) profits were damage by an eighty-eight percent expand in provisions for credit losses, which totaled $1.8 billion latest quarter. The Wall Str firm said that expand was fueled by the necessity to set aside more money to cover loans that are souring in the struggling commodities industry.

That included an expand of $529 million in the oil, natural gas and pipeline business and $162 million in metals and mining. Even though oil prices have rebounded recently, many U. S. oil companies are below enormous financial pressure with oil at $40 a barrel. U. S. bankruptcies spiked three hundred seventy-nine percent latest year. Those problems can create headaches for JPMorgan and other firms that bankrolled the U. S. oil boom.

JPMorgan also warned it could've to set aside an extra 0 million for horrible oil and gas loans, though it warned there is a "high degree of variability" on that estimate. The bank said it'south closely monitoring for knock-on effects from the oil crash that could be impacting transportation and other companies that service the energy industry.

"We haven't really seen wide contagion in that space but we're looking very closely," Marianne Lake, JPMorgan'south chief financial officer, told journalists during a conference call.

Still, investors were fearing distant worse news from JPMorgan amid large struggles in the overall banking sector. JPMorgan'south profit of $1.35 per share easily exceeded estimates, sending the stock nearly three percent higher in premarket trading.

Related: Jamie Dimon brags about how mighty JPMorgan is

JPMorgan, which is the first large U. S. bank to report first-quarter results, is also feeling the brunt of what CEO Jamie Dimon called "challenging markets." The company'south income slipped three percent to $twenty-four.1 billion.

These struggles were highlighted by a 24 percent decline in investment banking income due to lower debt and underwriting fees. That makes sense since latest quarter was a terrible one in the IPO market, with number tech firms going public for the first time since the Grand Recession.

JPMorgan also said its markets income and fixed income income slumped latest quarter, reflecting a broader industrywide slump.

The excellent news is that Dimon doesn't look shadowy clouds on the horizon for the U. S. economy. He pointed to "healthy" trends for American consumers and JPMorgan'south skill to grow loans and deposits "impressively."

"I don't think you've a recession in two thousand-sixteenth," Dimon said. "The U. S. economy continues to plug along."

Dimon was uncharacteristically noiseless about another topic: Democratic presidential candidate Bernie Sanders. He declined to comment on remarks made by Sanders latest week claiming JPMorgan and most other large banks are "destroying the ethical fabric of America."

JPMorgan was also mum about whether Sanders would've the skill to crack up JPMorgan should he become president. "We're not going to comment on hypotheticals," Lake said.

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