J. P. Morgan & Co. on Wednesday posted a $586.4-million net loss for its second quarter as a result of its decision to add $875 million to its reserve for possible bad loans.
New York-based Morgan, the nation's fourth-largest bank holding company, had been expected to take a big loan-loss provision, following other major U.S. banks that had done so in acknowledgement of anticipated problems in collecting loans to troubled developing nations.
Morgan had a profit of $237 million in the second quarter of 1986.
Most of the other major banks that previously announced big loan-loss provisions also said they expected to take major second-quarter losses as a result. Citicorp, the nation's biggest bank holding company, said in May that it would take a $3-billion loan-loss provision and that it expected to lose $2.5 billion in the three months ended June 30.
By sharply boosting reserves, the banks reduce their current earnings but establish a cushion to protect future earnings from loans that must be written off or disposed of at a loss.