JPMorgan Chase & Co. added to its credit loss reserves in the first quarter even as contemporaneous reads of customer health and activity were largely consistent with recent periods, executives said during a conference call on the period's results.
Those include measures indicating continued health in the current state of consumer finances and businesses holding in a "wait and see" pattern in terms of borrowing, dealmaking and making longer-term plans.
Analyst questions focused on the outlook amid an upheaval in global trade policies. CFO Jeremy Barnum said the future "is obviously unusually uncertain" and observed that "some of the salient news flow is quite recent."
"I don't usually pay that much attention to anecdotes, but this time I am." Chairman and CEO Jamie Dimon said. He predicted further declines in consensus earnings forecasts for many companies across industries as they report earnings, and that many more will withdraw their guidance.
JPMorgan Chase did not substantially alter its own guidance for 2025 and continued to forecast net interest income, excluding its markets business, of $90 billion and a credit card net charge-off rate of 3.6%.
Barnum noted that the guidance is "contingent on a variety of external variables" and that net charge-off guidance does not necessarily say that much about the potential for an abrupt change in conditions through year-end since it generally takes some time for accounts to reach the stage of being charged off. "There's just a little bit too much uncertainty right now for me to give an outlook for reserves, which is generally not a thing that we do anyway," he said.
Dimon recalled the enormous spike in unemployment when the pandemic emerged. He said the bank had to add $15 billion to credit loss reserves in a two-month period before taking them down when conditions improved. (Dimon continued to be critical of the accounting rules behind such large swings.)
"That just sizes up a bad recession," he said. "If it's a mild recession, it will be less than that. If it's a really bad recession, it will be more than that. Either way, we can handle it and serve our clients."
The bank is continuing to maintain excess capital even though it increased its dividend and share repurchases in the first quarter to keep the surplus from growing larger.
Reserve build
The bank's credit provision expense increased 26% sequentially and 75% from the year prior to $3.31 billion. That was substantially in excess of the consensus forecast, though it still handily beat the consensus forecast for earnings per share on net interest income and fees, analysts said.
The provision included a reserve build of $973 million to $27.6 billion, including $441 million for consumer loans and $549 million for wholesale loans. The bank increased the weighting for downside economic scenarios that help determine reserve levels.
The reserves reflect a "relatively benign" central case that prevailed at the end of the quarter, Barnum said. However, "it felt like the forecasts were kind of lagging." President Donald Trump made his "Liberation Day" tariff announcement April 2.
Barnum said that contemporaneous consumer spending data may include a pull-forward to get ahead of tariffs that might create "distortions in the data that make it hard to draw larger conclusions."
Meanwhile, corporate clients are shifting "their focus away from more strategic priorities with obvious implications for the investment banking pipeline outlook toward more short-term work, optimizing supply chains and trying to figure out how they're going to respond to the current environment," Barnum said.
