JPMorgan Chase says Fed stress test results contained error

JPMorgan Chase said late Wednesday that the Federal Reserve overstated a key revenue measure in the giant bank's recent stress test, and that its losses under the test should actually be larger than what the regulator found.

The bank took the unusual step of issuing a press release minutes before midnight ET to reveal its response to the Federal Reserve's findings.

JPMorgan said the Federal Reserve's projections for a measure called “other comprehensive income” – which represents income, expenses and losses that are excluded from net income – “appear to be too large.”

According to the Federal Reserve's table of projected earnings, income and losses through 2026, JPMorgan was allocated $13 billion in OCI, more than any of the 31 lenders in this year's test. It also estimated that the bank would face approximately $107 billion in losses on loans, investments and business operations in that scenario.

“If the company's analysis were correct, the resulting stress losses would be modestly higher than those disclosed by the Federal Reserve,” the bank said.

The error means JPMorgan may need more time to finalize its share buyback plan, according to a person with knowledge of the situation. Banks were expected to begin revealing those plans on Friday after the market closed.

The news is a reversal of the Federal Reserve's announcement yesterday that all 31 banks in the fiscal year cleared the hurdle of being able to withstand a hypothetical severe recession while maintaining adequate capital levels and the ability to lend to consumers and corporations.

Last year, Bank of America and citi group made similar disclosures, saying that estimates of their own future earnings differed from the Federal Reserve's results.

Banks have complained that some aspects of the annual review are opaque and that it is difficult to understand how the Federal Reserve produces some of its results.