NEW YORK–The nation’s biggest banks may have seen billions of dollars in fee-income from making loans through the Paycheck Protection Program, but many of them say they expect to see little margin from the PPP, with other indicating they will donate to various charities any profits made.
Banks that were the largest lenders under the PPP told the New York Times their expenses were so high that they expect to make next to nothing on the loans. The Times noted that at JPMorgan Chase, for example, the chief financial officer, Jennifer Piepszak, said on a quarterly earnings call in July that profit from the program “will be near zero.” Her counterpart at Bank of America, Paul M. Donofrio, said he did not expect much profit, “if any.”
The $525 billion program handed banks at least $13 billion in fees, according to a New York Times analysis of data from the Small Business Administration. Any true profits from making PPP loans won’t be known until the loans, which will be forgiven if borrowers meet certain criteria, are all paid off or resolved, the Times added.
Profits ‘Eaten Up’
“But some banks are already saying their profits will be eaten up by the costs they incurred to make the program work, including all-nighters and rushed technology projects during four frenzied months of lockdowns and business closures,” the Times reported. “Others, including many smaller lenders, expect the revenue from the program to pad their profits.”
Calculating a lender’s costs is nearly impossible because the program was so unusual, Saul Martinez, a managing director at the investment bank UBS, told the Times. “Pressured by the Trump administration to get money out the door quickly to legions of desperate businesses, banks paid overtime to squadrons of employees and hired consultants and technology vendors to help,” the report observed.
The government paid lenders a sliding fee ranging from 5% on loans of up to $350,000 to 1% for loans larger than $2 million. On the program’s average loan — of $100,729 — a lender would make just over $5,000.
How CUs Performed
According to CUNA economists and statistics from the Small Business Administration, the average credit union-issued PPP loan was only $49,000, with 94% of credit union-facilitated PPP loans falling below $150,000.
The Times reported that collectively, the 5,460 PPP lenders took between $13.7 billion and $20.9 billion, according to the Times analysis.
The Times further cited analysis by Keefe Bruyette & Woods that suggests the median fee paid to banks was around 3%.
$400 Million Donation
“At that rate, JPMorgan — the program’s largest lender, distributing $29 billion to more than 280,000 businesses — would have collected fees of $881 million. Bank of America, which gave nearly $26 billion to 340,000 businesses, would have received $767 million,” the Times said.
Bank of America, JPMorgan, Citibank and Wells Fargo, the nation’s four biggest banks, have all pledged not to profit from the program and to donate any fees to charity. In particular, Wells Fargo has said it will donate approximately $400 million to a new fund to support CDFIs.