US banking giant JP Morgan reserves more cash to cover loan defaults as rising interest rates put pressure on borrowers
US banking giant JP Morgan has set aside more cash to cover loan defaults as rising interest rates put pressure on borrowers.
It came as second-quarter earnings increased by two-thirds as it raised more money from interest payments on loans. Provisions for credit losses, the amount set aside to offset bad debts, rose to almost £2.2bn from £839m in the same period last year.
About £915m was owed to the bailout of California lender First Republic, which collapsed in May amid a crisis sparked by the failure of Silicon Valley Bank.
Despite the provision increase, JP Morgan reported a “buy-out gain” for First Republic of £2.1bn, with profit rising 67% to £11bn during the quarter, while revenue rose 34%. to £31.5 billion.
But revenue from the markets division fell 10 percent to 5.3 billion pounds as stock traders remained uneasy about the outlook.
‘Strong results’: Q2 profit increased by two-thirds as JP Morgan raised more money from loan interest payments
JP Morgan chief Jamie Dimon praised the “strong results” but warned of the risks facing the US economy.
He noted that consumers were “slowly depleting their cash reserves” and that “stubbornly high” core inflation increased the risk that interest rates would rise and stay there for longer.
Several Wall Street financiers have called for Dimon to run for US president next year, but he has denied the rumors and said he would consider serving in government.
JP Morgan’s results were a stark contrast to those of Citigroup, where profit for the quarter fell 36 percent to 2.2 billion pounds as higher interest rates failed to offset a drop in its trading revenue.
