JPMorgan sees consumer loan defaults rising
By Elinor Comlay
NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N:) said on Friday it expects consumer loan defaults to increase in the current quarter and sees higher loan loss provisions.
The bank has more than $395 billion in consumer loans, with the largest chunk in home equity. Mortgages, credit cards and auto loans are also in the portfolio, according to a filing with regulators on Friday.
"Given the potential stress on the consumer from rising unemployment, the continued downward pressure on housing prices and the elevated national inventory of unsold homes, management remains extremely cautious," the bank said in the filing.
It warned that home equity loans and more risky mortgages made since 2006 make up a large chunk of its portfolio, and defaults are rising as home prices continue to fall.
JPMorgan expects charge-offs of bad loans in its home lending portfolio to increase in the current quarter and into 2009, the filing said.
The bank's mortgage portfolio has performed better than those of some of its rivals because JPMorgan did not made as many of the more risky types of loans that caused massive writedowns at other banks such as Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz).
JPMorgan has $18.2 billion of risky mortgages known as subprime, including $4.7 billion of subprime loans acquired when it bought Washington Mutual in September.
The bank said the charge-off rate for its credit card business may rise above 5 percent in the fourth quarter and increase further next year.
The net charge-off rate for its managed credit cards climbed to 5 percent in the third quarter, up from 3.64 percent in the same period last year.
Separately, the bank said it expects an after-tax gain of $600 million in the fourth quarter from the dissolution of Chase Paymentech Solutions, a joint venture with payments processor First Data Corp FDC.BA.
JPMorgan's shares were down 15 cents to $38.11 in early trading on the New York Stock Exchange.
(Reporting by Elinor Comlay; editing by Jeffrey Benkoe and John Wallace)
