Three big US banks have set aside almost 28 billion dollars amid concerns about customers defaulting on loans due to the pandemic.
The decision helped push Wells Fargo to its first quarterly loss since 2007 and weighed on the financials of other banks. JP Morgan Chase profits roughly halved, while Citigroup’s plunged 73%.
The firms warned of a painful economic downturn ahead, despite recent positive data.
JPMorgan said it expected US unemployment to remain at nearly 11% at the end of the year, compared to the 7% it forecast in April. The bank said it had set aside more than 10 billion dollars for losses, including nearly 9 billion to build its reserves.
Citigroup, which has set aside about 7.8 billion dollars to cover potential losses, said it expected customers to default on nearly 4% of its loans, up from 2% in 2019.
At both Citigroup and JP Morgan Chase, increased trading activity helped offset a slowdown in consumer spending.