JPMorgan CEO: Bank sees more mortgage losses

AP News
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Posted: Dec 08, 2009 4:56 PM

JPMorgan Chase & Co.'s CEO said Tuesday that the bank sees additional losses on home loans next year even as the economy shows slight improvements.

Jamie Dimon told investors at the Goldman Sachs U.S. Financial Services conference in New York that his bank is seeing initial signs of stability in consumer delinquency trends, but he also warned that it is not certain if the trend will continue.

JPMorgan has emerged from the financial crisis as one of the nation's strongest banks. But Dimon said if the economy weakens further, his bank may need to boost its reserves.

Mounting subprime mortgage defaults beginning in 2007, and eventually losses across all types of home loans, helped push the nation's economy into a recession. A stabilization and improvement in defaults and home prices is considered necessary for a strong economic recovery. Nearly all banks have faced rising losses tied to souring mortgage debt.

JPMorgan could see losses on home equity loans reaching $1.4 billion over the next several quarters, compared with losses of $1.1 billion in the third quarter.

Prime mortgage losses may reach $600 million, up from $525 million in the third quarter, and subprime mortgage losses could grow from $422 million in the third quarter to $500 million in coming quarters, according to slides from the bank's presentation.

Dimon added that the bank's home lending portfolio may shrink 10 percent to 15 percent to about $240 billion in 2010, and $200 billion in 2011 if current trends continue. That decline would reduce 2010 net interest income in the portfolio by about $1 billion, the bank said.

The bank also acquired investment bank Bear Stearns in March 2008. In recent quarters, JPMorgan's investment bank profits have helped offset consumer businesses losses.

Shares of JPMorgan closed down 4 cents at $41.21 on Tuesday.