NEW YORK (Reuters) - JPMorgan Chase & Co (>> JPMorgan Chase & Co.) executives said on Thursday they do not expect losses on the bank's oil and gas loans to accelerate with the pace and severity that the decline in oil market prices might suggest.
"The oil folks have been surprisingly resilient," Chief Executive Jamie Dimon said in a conference call with analysts.
His comment came after being challenged on whether the bank had boosted its reserves too little in the fourth quarter when it added $124 million to cover losses on its oil and gas portfolio. The portfolio amounted to $42 billion, 5.3 percent of wholesale loans and less than 2 percent of total assets, as of the end of September.
At Citigroup Inc, (>> Citigroup Inc) which is to report results on Friday, Chief Financial Officer John Gerspach said last month that sustained low oil prices would be the primary reason the bank would likely add to its reserves in the quarter.
Dimon said the damage to oil producers' revenue from lower prices had been offset somewhat by the fact that the cost of getting oil out of the ground has "dropped dramatically, and probably much more than most of us would have expected."
In some cases production costs are down as much as 50 percent, Dimon said earlier, on a call with journalists after posting quarterly results.
How much money oil companies and their lenders could lose has become a big issue for investors, who have been shaken by losses surfacing in the junk energy bond market. Credit spreads, a measure of the market's view of risk, touched their highest levels on Wednesday as oil prices plunged to a new 12-year low. [L2N14Y15G]
On Wednesday, energy-focused regional bank BOK Financial Corp
A clutch of regional lenders, including Associated Banc-Corp (>> Associated Banc Corp) and Hancock Holding Co (>> Hancock Holding Company) have upped their provisions in recent weeks.
Dimon said the additional reserves at JPMorgan were mostly for smaller companies. "We're not worried about the big oil companies," he said. Bank loans are backed by oil company assets and do not necessarily go bad when companies go into bankruptcy to restructure their obligations, he added.
Still, JPMorgan expects to record additional expenses in coming quarters to increase its reserves for oil and gas loan losses, Chief Financial Officer Marianne Lake said.
Dimon said he would prefer to build reserves more aggressively, but accounting rules limit the discretion that banks have in the those decisions. The rules aim to keep companies from boosting future earnings by reversing reserves they booked in excess.
Lake repeated the bank's statement from October that if oil remains around $30 a barrel for 18 months, JPMorgan could add $500 million to $750 million to reserves.
(Reporting by David Henry in New York; Editing by Tom Brown)
By David Henry
