NEW YORK: Large US banks have set aside billions of dollars in additional reserves for bad loans, according to earnings reports Tuesday that underscored the weakening economic outlook due to the coronavirus pandemic.
JPMorgan Chase established another US$8.9 billion in reserves, more than the backstop in the first quarter, as it now expects a more “protracted” economic recovery in the second half of 2020 compared with its earlier outlook, Chief Financial Officer Jennifer Piepszak said. And Wells Fargo put another US$8.4 billion in reserves in the second quarter, pointing to the “unprecedented” nature of the pandemic.
Wells Fargo Chief Executive Charlie Scharf said the bank is “extremely disappointed” in the decision, but said, “Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter”.At JPMorgan, net income fell 51% to US$4.7 billion, translating into earnings-per-share that topped analyst forecasts. Revenues jumped 15% to US$33.8 billion, its highest ever for a quarter.
JPMorgan saw improving economic conditions in May and June, but those were the “easy months” due to federal stimulus funds, Piepszak said, adding that the coming period would be “much more challenging”.
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