JPMorgan Chase & Co's profit plunged by more than two-thirds in the first quarter as the largest US bank put aside nearly $7 billion in reserves to protect it from a wave of potential loan defaults in the months ahead.
The results painted a grim picture at the start of a long, tough period for lenders, with chief executive Jamie Dimon saying the economy was facing a "fairly severe" recession because of the economic shutdown caused by the coronavirus.
"If the economy gets worse, we'll bear additional loss," Dimon said on a call with analysts. "But we do forecast all of that. We know we can handle really adverse consequences."
That tone was repeated by the third biggest US bank, Wells Fargo & Co, which also reported profits plunged as it boosted reserves in the first quarter.
In total, JPMorgan recorded charges worth $8.3 billion in the first quarter, mostly due to money the bank set aside to cover loans.
JPMorgan also reported a $951m loss on derivatives and an $896m markdown on its bridge loans.
JPMorgan's chief financial officer, Jennifer Piepszak, that the bank may "meaningfully" increase the amount it is holding in credit reserves next quarter and later in the year if the economy worsens.
"We haven't actually seen the stress emerge yet," Piepszak said.
"What we took in the first quarter is our best estimate of future losses. It is our best estimate of the losses that will inevitably emerge through this crisis."
The reserves included $4.5 billion against potential consumer loan defaults as millions of Americans lose their jobs and struggle to make payments on anything from iPhones to cars to new microwaves.
A new accounting rule requires banks to take provisions now if a borrower may default at any point during the agreement, even if that is months or years away.
Revenue at three of the bank's four main businesses were down, although trading proved to be a bright spot in an otherwise dismal quarter.
JPMorgan's investment bank was hurt by a near-total halt in M&A activity and underwriting, with the exception of investment-grade debt.