JPMorgan Chase is adding another layer in its capital buffer against energy, metals and mining loan losses, setting aside $600 million for losses, executives announced Tuesday.
The bank also warned that first quarter revenue from investment banking fees is down about 25 percent year over year, with markets revenue down 20 percent from a year earlier. Shares traded near their lows of the day after the warning.
Nevertheless, bank CEO Jamie Dimon said the company is profitable and is glad he put up more than $26 million of his own money to buy 500,000 shares on Feb. 11. The stock is up about 4 percent since then, netting him more than $2 million in profit.
"I had a morning where I wasn't doing anything," Dimon said at the company's investor day presentation.
The bank also projected that, should the price of oil remain at or below $25 a barrel, it will have to set aside $1.5 billion more to cover potential losses through the next 18 months.
"We've taken reasonably conservative estimates," CFO Marianne Lake told attendees.
A report Tuesday from investment bank Jefferies, which is bullish on JPMorgan, notes that the bank's reserves against energy loans it funded represents a cushion of approximately 9 percent.
The bank had established a cushion of $815 million by the end of 2015 for loans in the energy sector, and added $500 million more, executives said. In the metals and mining space, where the bank had already set aside $240 million to guard against underperforming loans, the bank added $100 million more.
Prior to reporting fourth-quarter earnings earlier this year, Wall Street banks revealed their exposure to souring loans in the energy sector as U.S.-based production has plummeted, coinciding with falling commodity valuations. With the price of oil continuing to slide this year, and as bankruptcies in the sector accelerated in the back half of 2015, analysts have trained a keen eye to how banks are reacting to distress in their energy-loan portfolio.
It remains to be seen whether other Wall Street banks will reveal similar measures in advance of April first-quarter earnings announcements.
JPMorgan's biggest exposure within the energy sector is to exploration and production companies, at 39 percent of its $44 billion portfolio. Thanks to U.S. oil production falling faster than international competitors', exploration and production companies based in America were especially hard hit by downward commodity trends. As of the end of 2015, the portion of capital within the $44 billion portfolio that has been drawn by borrowers is $14 billion, according to data supplied by the bank.
According to Lake's presentation, JPMorgan's energy loan portfolio consists of 57 percent investment-grade paper, contrasted against its metals and mining portfolio, with 46 percent investment-grade loans.
Within the $13 billion metals and mining portfolio, according to the presentation, $5 billion had been drawn by the end of 2015.