JP Morgan Projects Deepening Energy Losses

JP Morgan Chase & Co. (NYSE: JPM) announced it will add around $500 million to its reserves for expected additional losses on the bank’s energy loans. The bank already has $815 million in reserves for oil and gas and $240 million for mining and metals. The bank admitted that the first quarter will be rough, and it believes that the losses will continue as oil prices continue to slump. This money, if it wasn’t tied up in reserves to cover losses, could be put to use to benefit investors. The executive in charge of the investment division also projected losses on the investments side, stating that the revenue from investments is expected to be 25 percent lower as compared to the first quarter of 2015. Following the announcement, JPM’s share prices fell, losing $9 billion in value.

(Nasdaq.com)

JPM Under Ongoing Conflict of Interest Investigation

JPM revealed in its annual filing that it is still under an ongoing conflict of interest investigation. The probe is focused on how the bank used and sold its investment products held within trusts established to benefit churches. JPM previously settled the matter in Dec. 2015 with the SEC, but Indiana regulators are now reportedly investigating as well. The bank was sued by Christ Cathedral Church for fraud for the manner in which the bank handled trust proceeds in Aug. 2014, and that case is still ongoing as well.

Recent Results and Comparison With Competitors

Since the beginning of 2016, JPM’s trailing total return percentage has fallen by -14.31 percent, underperforming the S&P 500, which has dropped by -7.10 percent. Bank of America (NYSE: BAC) has experienced a drop in its trailing total return percentage of -27.93 in the same time period. JPM indicated its energy losses may reach $2.8 billion, so its performance can be expected to continue to be poor. Bank of America, on the other hand, may have already neared its bottom and might be a good value.