JPMorgan Chase said it expects to increase its loan-loss reserves by about $2.4 billion this quarter while posting losses in its private equity and corporate lending businesses.

James Dimon, the New York company's chairman, president, and chief executive, also said during a presentation at a conference hosted by Merrill Lynch that it is unclear when the company would no longer need to boost reserve levels.

JPMorgan's reserve estimates excluded covering loans from Washington Mutual, whose banking operation it bought last month for $1.9 billion in a government-brokered deal.

The $2.25 trillion-asset company projected that quarterly home equity losses could be as high as $850 million over the next few quarters, with chargeoff rates possibly reaching 3.75%. It also expects the loss rate on credit cards to reach 5% this quarter, rising to 6% by early next year and 7% or higher a year from now.

"But we still feel we can make some money" in those businesses, Dimon said.

Dimon said there are opportunities embedded within the turmoil. JPMorgan Chase has been buying pieces of securitizations "at enormously fabulous yields" to include in its own investments portfolio.

He also told the conference attendees that he had recently moved "a lot of my cash" out of accounts making about 1% a year to buy JPMorgan Chase preferred stock with an 11% return. "I think they're pretty good investments."

 

 

Originally published by American Banker.