JPMorgan Chase’s profit dropped 51% in the second quarter of 2020 to $4.7 billion, compared with $9.7 billion last year as the bank set aside $8.9 billion to cover potential credit losses amid a recession brought on by the coronavirus pandemic.
The country's largest bank Tuesday reported a net loss of $176 million at its consumer banking division, compared with net income of $4.2 billion in the prior year, while its commercial unit reported a net loss of $691 million for the quarter, compared with net income of $1 billion last year. Record trading revenue from the bank's investment arm, however, helped minimize the bank's losses amid the fallout from COVID-19. JPMorgan’s investment bank reported net income of $5.5 billion, up 86% from last year's comparable quarter.
"Despite some recent positive macroeconomic data and significant, decisive government action, we still face much uncertainty regarding the future path of the economy," JPMorgan Chase CEO Jamie Dimon said in a statement. "However, we are prepared for all eventualities as our fortress balance sheet allows us to remain a port in the storm."
Like the previous quarter, JPMorgan Chase once again set aside a significant amount in credit reserves as the bank prepares for anticipated loan losses amid the pandemic.
The bank set aside $6.8 billion during the previous quarter ending March 31, just weeks after the COVID-19-related shutdowns were beginning to take their toll on the economy.
The bank’s total reserve for credit losses, as of June 30, was $34.3 billion.
JPMorgan Chase Chief Financial Officer Jennifer Piepszak said deposit growth in the bank’s consumer division increased by a record 20% year-over-year, up over $130 billion.
Piepszak said the bank estimates approximately 50% of that deposit growth is related to the coronavirus, including government relief for consumers and small businesses, lower consumer spending and tax payment delays.
"We do think some of that will leave with tax payments and more spending coming back," she said on a call with analysts. "In terms of how much of it is sheer gains, it's difficult to know at this point."
When asked if the bank may rethink its branch strategy in light of its ability to grow deposits while many branches remain closed due to the virus, Piepszak said the bank hasn't learned enough to make any immediate changes.
"We're not going to make any big changes quickly because we want to make sure that we have the benefit over time of watching our customer behavior so they can really be the ones that inform our strategy," said Piepszak, adding 1,000 of the bank’s branches remain closed.
The bank recently opened the 100th branch of its market expansion plan and is on target to open another 75 this year, she said.