US banking giant JP Morgan has put aside more cash to cover loan defaults as rising interest rates strained borrowers.
It came as profits for the second quarter surged by two-thirds as it raked in more money from interest payments on loans. Provisions for credit losses – the amount set aside to offset bad debts – rose to nearly £2.2billion from £839m in the same period last year.
Around £915m of that was due to its rescue of California lender First Republic, which collapsed in May amid a crisis sparked by the failure of Silicon Valley Bank.
Despite the increased provision, JP Morgan reported a ‘bargain purchase gain’ for First Republic of £2.1billion, with profits up 67 per cent to £11billion during the quarter, while revenues rose 34 per cent to £31.5billion.
But the markets division’s revenues fell 10 per cent to £5.3billion as stock traders remained skittish about the outlook.
‘Strong results’: Second quarter profits surged by two-thirds as JP Morgan raked in more money from interest payments on loans
JP Morgan boss Jamie Dimon hailed ‘strong results’ but warned of risks facing the US economy.
He noted that consumers were ‘slowly using up their cash buffers’ and ‘stubbornly high’ core inflation increased the risk of interest rates going higher and staying there for longer.
Several Wall Street financiers have called for Dimon to run for the US presidency next year but he has talked down the rumours while saying that he would consider serving in government.
JP Morgan’s results were a stark contrast to Citigroup, where profits for the quarter tumbled 36 per cent to £2.2billion as higher interest rates failed to offset a slump in its trading revenues.
