JPM's Loan Loss Reserves; Standard Chartered Ends Bonuses

Receiving Wide Coverage ...

JPM Raises Energy Loan Reserves: JPMorgan Chase executives sought to calm investors Tuesday after it announced plans to increase loan loss provisions for oil and gas by $500 million, which drove its share price down 4.2%. CFO Marianne Lake said JPM could have increased reserves 60% from the end of 2015 to $1.3 billion — the bank has done well in limiting its exposure to potential losses in the energy sector — but could still be forced to set aside another $1.5 billion if oil prices hover near $25 a barrel for too long. Doug Petno, CEO of the commercial banking division said this quarter it expects to increase reserves to 10% from 6%; and in the spring cut revolving credit facilities of reserve-based clients between 15% and 20%. "There will be a meaningful number of these players that have no options," he said. "We've only just begun to see the range of bankruptcies in oil and gas." JPM has $44 billion in loans to that industry. Nevertheless, it projects profits of $30 billion this year, compared to $24.4 billion in 2015. Wall Street Journal, Financial Times, New York Times

Bye Bye Bonuses: Standard Chartered is scrapping bonuses for all but its most senior executives, after reporting its first annual loss since 1998. The bank spent $28 million on so-called "fixed pay allowances" last year and plans to opt for salary increases instead, if appropriate. According to the Journal, the move was motivated by a regulatory update by the European Banking Authority specifying rules on annual bonuses. But CEO Bill Winters told analysts the bank is conducting "accountability reviews" following its earnings report, to see where it can begin clawing back bonuses for any employee responsible for compliance and risk management breaches — "clear-cut cases of malfeasance" or "gross negligence," as Winters put it. Wall Street Journal, Financial Times

Wall Street Journal

Online lending firm OnDeck saw shares plunge 20% after announcing slower-than-expected growth this year and adjusting its profit forecast to less than half of Wall Street expectations. The marketplace lending niche has enjoyed a steady rise in the last few years, but OnDeck is now showing market turmoil could make it difficult for any of them to sell loans to investors. It may have to hold onto more of the loans it makes, thereby limiting the gains it can record on its books. Executives are pointing to the company's recently announced partnership with JPMorgan Chase, in which OnDeck provides decision-making technology for loan applications while JPM shoulders the risk, as its moneymaker. But CFO Howard Katzenberg said on an earnings call late Monday that it doesn't expect to see revenue from that deal scale until at least 2017, possibly 2018. Needless to say, investors are anxious. CEO Noah Breslow did not provide a revenue projection for that partnership, though he did say the company has struck similar deals with other banks.

New York Times

Signature Bank in New York is being sued in a Florida state court for losing $66 million of investor money. The investor group that filed the lawsuit alleges Signature helped money manager William Landberg advance his Ponzi scheme by instructing him to shift money around dozens of accounts he held to cover long-term overdrafts. Landberg pleaded guilty in 2011 and served his three-and-a-half-year sentence for securities fraud, but the investors claim they still have not recovered their money.