JPMorgan will add to energy loan loss reserves, CEO says

JPMorgan a major lender to energy companies

JPMorgan

JPMorgan Chase & Co CEO Jamie Dimon told investors the lender will increase its reserves against losses on oil and gas loans.  LinkedIn photo.

NEW YORK, June 2 (Reuters) – JPMorgan Chase & Co will book additional expenses in the second quarter to increase its reserves against losses on oil and gas loans, Chief Executive Jamie Dimon said on Thursday.

Dimon, speaking at an investor conference about a wide range of topics, did not say how much the additional provisions would be, but said he would not consider the amount to be “material.”

The additions will be made in part because of slipping in the credit worthiness of a few large borrowers, and regulators have pushed for more conservative loss reserves, Dimon said.

A warning from JPMorgan in February about rising costs for energy loan losses foreshadowed announcements of sharply higher provisions by smaller banks with more of their loans to the sector.

While JPMorgan is a major lender to energy companies, loans to oil and gas and pipeline industries are relatively small compared to the overall size of JPMorgan, which is the biggest U.S. bank by assets with $2.42 trillion. Loans to those industries at the end of March totaled $48 billion, or 5.8 percent of JPMorgan’s total wholesale loans.

Dimon, who spoke in response to questions from a moderator and not from a prepared speech, voiced more concerned about taking appropriate caution in other areas. These included bond market trading amid rising interest rates, auto finance and deploying new information technology, such as cloud computing and distributed ledgers to provide customer services record transactions.

Too many autos are being financed with leases or loans that are too large for the value of the cars, he said, adding that JPMorgan was being more cautious in the sector.

Dimon said it was “my fault” that the bank had not moved faster to use the cloud for customer accounts and transactions, and that he has worried about security.

He added later that he wants to make sure that distributed ledger, or blockchain, technology that the bank is testing is safe before overhauling the way trades are recorded.

Asked about threats to his generally upbeat outlook for the bank and banking, Dimon recommended that people be on alert for extreme bond market volatility toward the end of the year.

Trouble will come, he warned, if the pace of economic growth builds and interest rates rise more quickly than expected.

(Reporting by David Henry in New York; Editing by Bernadette Baum)

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