{"id":18128,"date":"2016-02-23T12:11:23","date_gmt":"2016-02-23T17:11:23","guid":{"rendered":"http:\/\/olduvai.ca\/?p=18128"},"modified":"2016-02-23T12:11:23","modified_gmt":"2016-02-23T17:11:23","slug":"jpmorgan-just-sounded-a-500-million-alarm-bell-on-americas-dying-oil-patch","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=18128","title":{"rendered":"JPMorgan Just Sounded a $500 Million Alarm Bell On America’s Dying Oil Patch"},"content":{"rendered":"

JPMorgan Just Sounded a $500 Million Alarm Bell On America’s Dying Oil Patch<\/a><\/h3>\n
Back on\u00a0January 14<\/a>, we noted that JPMorgan did something they haven\u2019t done in 22 quarters: the bank increased its loan loss provisions.<\/div>\n
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The “reserve build of ~$100mm [is] driven by $60mm in Oil & Gas and $26mm in Metals & Mining within the commercial banking group,\u201d the bank said.<\/p>\n

\"\"<\/a><\/p>\n

That led us to ask of JPMorgan the same thing we\u2019ve asked of Wells Fargo, BofA, and every other TBTF that\u2019s gotten itself overextended in America\u2019s soon-to-be bankrupt O&G space: “if a regional bank like BOK Financial was slammed by just one loan (to what we can only assume was a smaller energy firm), where does the buck stop, and how many other regional, or even big, banks, are woefully underreserved in their exposure to energy loans?”<\/p>\n

Most importantly, we said, are these follow up questions:<\/p>\n

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\u201cHow long before the impairments and charges currently targeting smaller firms finally shift to the bigger ones? And\u00a0how underreserved is JPM for that eventuality?<\/strong>\u201d<\/div>\n<\/blockquote>\n

Today, just over a month later, we got the answer ahead of JPM’s investor day,\u00a0when JPMorgan said it will increase its reserves for oil and gas loans by 60% in Q1<\/strong>.<\/p>\n

As you can see from the following slide, provisions will rise by $500 million from $815 million the bank had set aside as of the end of last year. Metals and mining reserves will also rise, by $100 million.<\/p>\n

\"\"<\/a><\/p>\n

Note also that the bank says it\u00a0may be forced to provision another $1.5 billion<\/strong>\u00a0should crude prices stay at or near $25 for an extended period of time.<\/p>\n

As is apparent from the chart, Dimon’s “fortress” balance sheet includes some $19 billion in HY O&G exposure. We’re anxious to see if the vaunted billionaire will dismiss the enormous writedowns that are invariably coming in the next few quarters as a “tempest in a teapot.”<\/p>\n

We also wonder which bulge bracket bank will be the next to admit that it’s woefully underreserved for 2016’s inevitable crude carnage.<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

JPMorgan Just Sounded a $500 Million Alarm Bell On America’s Dying Oil Patch Back on\u00a0January 14, we noted that JPMorgan did something they haven\u2019t done in 22 quarters: the bank increased its loan loss provisions. The “reserve build of ~$100mm [is] driven by $60mm in Oil & Gas and $26mm in Metals & Mining within […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2,3],"tags":[4333,12555,2267,12556,1729,3356,3892,4318],"class_list":["post-18128","post","type-post","status-publish","format-standard","hentry","category-economics","category-energy-2","tag-crude","tag-fortress-balance-sheet","tag-jp-morgan","tag-loan-loss-provision","tag-oil-and-gas-industry","tag-oil-patch","tag-wells-fargo","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18128","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=18128"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18128\/revisions"}],"predecessor-version":[{"id":18129,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18128\/revisions\/18129"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=18128"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=18128"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=18128"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}