NEW YORK–The nation’s banks are reporting considerably smaller quarterly profits as they set aside billions in reserves to cover potential losses on consumer and business loans. The banks’ forecasts and expectations raise questions around the level of losses credit unions can expect as the coronavirus pandemic goes on.
JPMorgan Chase, the nation’s largest bank, reported it has set aside another $6.8 billion to cover potential losses, resulting in a nearly 70% decline in the first quarter. The bank warned it may set aside even more during the second quarter depending on how the economic situation plays out.
Wells Fargo, meanwhile, reported it has reserved an additional roughly $3 billion in the quarter for potentially bad loans, both in the consumer and commercial divisions. That raised its total provision to $3.83 billion, according to the Wall Street Journal.
“We don’t know what the time frame is or how quickly the economy will recover,” Wells Fargo CEO Charles Scharf told the Wall Street Journal. “What we do know is the contraction is real.”
Both big banks reported a decline in spending on credit cards. JPMorgan said most customers kept up payments on credit cards through April 1, but that more customers have been late on those loans in the past two weeks. Wells Fargo said that consumers had already contacted Wells to defer more than a million payments, mostly on mortgages and auto loans, the Journal reported.
In response, many banks and other lenders have begun to toughen their loan underwriting standards, the Journal added.
JPMorgan has also closed hundreds of its branches.