Major Banks Face Worst Quarter Since Great Recession

Large banks in the U.S. have seen rising default rates on credit cards and loans since pandemic restrictions and historic job losses began in early March. Many banks and credit card companies have reduced or eliminated interest rates and minimum payments for a good part of 2020. Because of this and an overall slow recovery expected by economic experts, data shows that banks are gearing up for an expensive stretch of losses on loans.

According to data collected by Bloomberg, top banks like Wells Fargo, Bank of America, Citigroup and JPMorgan Chase have continued to increase available provisions for loan losses for the second quarter of 2020 – continuing a trend from the first quarter of drastic increases in loan-loss provisions. JPMorgan Chase reportedly has the highest amount of cash available to overcome the cost of loan defaults, with a predicted $8.4 billion set aside for the second quarter. Close behind is Citigroup with an estimated $6.7 billion, while all other banks are also greatly increasing their upward trend for the year.

Overall, combined Q2 earnings from these four banks are predicted to be the lowest since the Great Recession. Experts are expecting continued losses for the massive companies even if COVID-19 cases start to fall and are under control by the third or fourth quarter of 2020. But cases of the virus aren’t falling, instead rapidly increasing in many parts of the country, which could cause banks to revise estimates for the third quarter to account for even steeper losses.