JPMorgan Sets Aside Money for Bad Debts as ‘Mild Recession’ Looms

JPMorgan Chase is starting the year with a warning.

The bank, the largest in the United States, reported a better-than-expected profit in the fourth quarter, but raised the risk of a “mild recession” to arrive later this year. To prepare, JPMorgan is setting aside more than $1 billion to prepare for the possibility that more borrowers fall behind on their loans.

The specter of recession is a common topic of discussion in corporate America these days, but the mention of one in an earnings release was new for JPMorgan, whose size makes it a bellwether for the U.S. economy. On a call with reporters, the bank’s chief executive Jamie Dimon — normally one of the more gregarious Wall Street figureheads — repeatedly demurred from hard-and-fast predictions.

“We don’t know the future,” he said. “There are all these geopolitical uncertainties which are real, and we have our eyes focused on it. They may go away or they may not.”

JPMorgan, like most of the biggest banks, is in a position to do well either way. It earned a profit of $11 billion last quarter, up 6 percent from the same period a year earlier.

Investment banking revenue — which includes the fees earned from advising companies on mergers and other transactions — plunged 57 percent as the slowing economy and falling markets sent big companies into retrenchment mode. Elsewhere at JPMorgan, which includes Chase consumer bank branches scattered across the country, revenue rose, which the company repeatedly credited to higher interest rates.

Those rising rates help it earn more as the bank profits from a wide gap between what it charges on loans, like mortgages and credit cards, and what it pays out in deposits and savings.

JPMorgan’s shares fell 1 percent in early trading.