JPMorgan Chase said its first-quarter profit fell more than 8 percent from a year earlier, and future profit growth could be threatened after it failed a key regulatory test designed to prevent another financial crisis.
First quarter profit at JPMorgan, the nation’s largest bank by assets, was hurt by weak results at its investment banking division and by loans to oil and gas companies that are now struggling to make payments because of low energy prices.
And as JPMorgan was announcing its quarterly results Wednesday, the Federal Deposit Insurance Corporation and the Federal Reserve announced that JPMorgan, as well as four other banks, failed to meet a regulatory requirement put in place after the financial crisis. They were required to come up with a plan, known as “living will,” to unwind their operations in the event of a bankruptcy or other upheaval in a way that would not trigger a broad financial meltdown.
Regulators called the banks’ plans “not credible” and gave them until October 1 to come up with new plans or face more stringent requirements.
JPMorgan was one of the few banks to weather the housing downturn and financial crisis and JPMorgan CEO Jamie Dimon has touted the firm’s “fortress” balance sheet, which he says would protect the bank from any future crisis.
“We are going to do everything we can to fix this problem,” Dimon said in a conference call with journalists.
This latest regulatory issue comes at a difficult time for JPMorgan and other big banks. Profits and share prices have fallen in recent months because as loans to energy companies have gone bad and the Federal Reserve signaled it will slow the pace of interest rate increases, which hurts bank profits. The financial sector is the worst performing sector of the Standard & Poor’s 500 index this year.
JPMorgan said Wednesday that it earned $4.99 billion after payments to preferred shareholders in the first quarter. That compares to a profit of $5.45 billion a year earlier. On a per share basis, the bank earned $1.35, compared with $1.45 a year earlier.