JPMorgan Chase said it would need to boost reserves for impaired energy loans by $1.5 billion if oil prices hold at about $25 a barrel over 18 months.
The first-quarter increase to reserves for oil and gas is expected to be about $500 million, bringing the total set aside to $1.3 billion, the New York-based firm said Tuesday in a presentation on its website. About 61% of the company's oilfield-services credit exposure is now rated junk, the firm said. JPMorgan is holding an investor day conference Tuesday to detail its financial outlook.
Bank stocks have declined this year, partly out of concern that credit costs are increasing because of exposure to energy companies. Chief Financial Officer Marianne Lake said in January that oil at $30 a barrel for 18 months would mean $750 million in additional reserves. Oil traded for more than $33 a barrel on Tuesday after a rally on Monday.
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Kelly King, BB&T's CEO, said his company is keen on eventually buying banks between Alabama and Texas, though his team would need to have frank discussions with any targets before pursuing a deal.
February 17 -
While the energy sector and regions that rely heavily on oil and gas production have been hit hard by the glut in the global oil supply and the closure of drilling rigs across the country, the probability of widespread bank failures as a result appears to be remote.
February 12 -
Bank chiefs should brace for a barrage of questions about economic uncertainty, if JPMorgan Chase's experience after releasing fourth-quarter results is any indication. Double-digit increases in loans and profits were not enough to stave off questions about the odds of recession, energy risks and adequacy of reserves.
January 14
"As the outlook for oil has weakened, we would expect to see some additional reserve build in 2016, but prices would need to remain at this level for an extended period for them to be significant," Lake said in January.
