(Reuters) - JPMorgan Chase & Co’s profit plunged by more than two-thirds in the first quarter as the largest U.S. bank put aside nearly $7 billion in reserves to protect it from a wave of potential loan defaults in the months ahead.

The results painted a grim picture at the start of a long, tough period for lenders, with Chief Executive Jamie Dimon saying the economy was facing a “fairly severe” recession because of the economic shutdown caused by the coronavirus.

“If the economy gets worse, we’ll bear additional loss,” Dimon said on a call with analysts. “But we do forecast all of that. We know we can handle really adverse consequences.”

That tone was repeated by the No. 3 U.S. bank, Wells Fargo & Co, which also reported profits plunged as it boosted reserves in the first quarter.

In total, JPMorgan recorded charges worth $8.3 billion in the first quarter, mostly due to money the bank set aside to cover loans. JPMorgan also reported a $951 million-loss on derivatives and an $896-million markdown on its bridge loans.

The bank’s shares were down about 3% in mid-day trading.

JPMorgan’s chief financial officer, Jennifer Piepszak, that the bank may “meaningfully” increase the amount it is holding in credit reserves next quarter and later in the year if the economy worsens.

“We haven’t actually seen the stress emerge yet,” Piepszak said. “What we took in the first quarter is our best estimate of future losses. It is our best estimate of the losses that will inevitably emerge through this crisis.”

The reserves included $4.5 billion against potential consumer loan defaults as millions of Americans lose their jobs and struggle to make payments on anything from iPhones to cars to new microwaves.

FILE PHOTO: A J.P. Morgan logo is seen in New York City, U.S. January 10, 2017. REUTERS/Stephanie Keith

A new accounting rule requires banks to take provisions now if a borrower may default at any point during the agreement, even if that is months or years away.

Revenue at three of its four main businesses were down, although trading proved to be a bright spot in an otherwise dismal quarter.

JPMorgan’s investment bank was hurt by a near-total halt in M&A activity and underwriting, with the exception of investment-grade debt.

Graphic - JPMorgan's loan book over the years:

For an interactive graphic on loans click

EARNINGS SLUMP

JPMorgan’s results launched a week of financial earnings on Wall Street that are closely watched by investors and show how much central-bank policies are affecting income and how well banks are placed for the months to come.

The bank’s net interest income stayed flat at $14.5 billion as lower interest rates were offset by higher net interest income from its investment banking business. It forecast annual net interest income of $55.5 billion.

The bank’s net income fell to $2.87 billion, or 78 cents per share, in the quarter ended March 31, compared with $9.18 billion, or $2.65 per share, a year earlier.

Analysts on average had expected $1.84 per share, according to Refinitiv. It was not immediately clear if the reported numbers were comparable with estimates.

One month ago, analysts had estimated that JPMorgan would make $2.74 per share, according to Refinitiv data. The additional reserves, largely as a result of COVID-19, reduced results by $1.66 per share, JPMorgan said.

“While a couple of critical issues like future reserves & run rate revenues ... will help shape the picture on what to do with JPM ... at first look we think 1Q20 results will be good enough to keep JPM remain profitable,” Evercore ISI analyst Glenn Schorr wrote in a note to investors on Tuesday.

Bank of America Corp, Citigroup Inc and Goldman Sachs Group Inc will report results on Wednesday and Morgan Stanley on Thursday.

There have so far been more than 1.8 million reported cases of COVID-19, the deadly respiratory disease stemming from the virus, and 115,242 deaths, according to a Reuters tally.