Please ensure Javascript is enabled for purposes of website accessibility

JPMorgan Chase Generates Record Revenue in Q2, While Setting Aside $10.5B for Potential Loan Losses

By Bram Berkowitz – Updated Jul 14, 2020 at 8:47AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The bank also saw record trading revenue in a quarter where the bank's net income beat estimates.

Despite having to set aside nearly $10.5 billion to cover future potential loan losses, JPMorgan Chase (JPM 0.19%) generated almost $4.7 billion in profits in the second quarter ($1.38 in earnings per share), beating most estimates. That's down about 51% from the second quarter of 2019, but up 77% from the first quarter of the year.

America's largest bank generated roughly $33.8 billion in total revenue, its highest quarterly revenue amount ever.

This explains how the bank managed to generate profits despite a quarterly loan-loss provision that is larger than any quarterly provision the bank took during the Great Recession.

This quarter's provision is also higher than the roughly $8.3 billion JPMorgan set aside to cover future potential loan losses last quarter.

JPMorgan Chase

Image source: Getty Images.

Revenue and profits were heavily buoyed by the corporate and investment bank, which generated nearly $5.5 billion in profits on net revenue of almost $16.4 billion.

"Despite some recent positive macroeconomic data and significant, decisive government action, we still face much uncertainty regarding the future path of the economy," 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."

Net charge-offs -- debt unlikely to be collected by the bank, a good indicator of ultimate write-offs -- remained low for the quarter at $1.6 billion, up slightly from the $1.4 billion in net charge-offs in the second quarter of 2019.

Despite net charge-offs remaining low, there is still trouble on the horizon.

Total non-performing assets, which is largely composed of loans that haven't received a payment in at least 90 days, reached $8.4 billion at the end of the second quarter, up 60% from the second quarter of last year and 35% higher than the first quarter of this year.

There are also still many borrowers on deferral plans, including 7.4% of borrowers in the auto loan portfolio and 6.9% of borrowers in the home loan portfolio.

The bank's common equity tier 1 ratio (a measure of a bank's core capital to total risk-weighted assets, and a metric closely watched by regulators) rose to 12.4% at the end of the quarter, up from 11.5% at the end of last quarter.

That will provide JPMorgan with some breathing room from its new required CET1 ratio of 11.3% in October.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

JPMorgan Chase Stock Quote
JPMorgan Chase
JPM
$136.74 (0.19%) $0.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.