The outlook for the U.S. economy from Wall Street’s biggest banks is getting gloomier, with many top executives saying they’re preparing for a potential downturn or a recession.
On one hand, they noted a low level of delinquencies, solid consumer spending and healthy activity among their business clients. At the same time, they acknowledged multi-decade high levels of inflation, a housing market that is slowing down quickly, and a Federal Reserve that is raising rates at an unprecedented pace, which will make it more difficult for businesses to borrow.
Reflecting the dimmer macroeconomic view, Citigroup, Wells Fargo and JPMorgan socked away cash in their loan-loss reserves. These reserves are set aside to cover potentially bad loans. During the pandemic, banks put tens of billions of dollars into these reserves but had released the bulk of those funds in 2021 reflecting the improvement in the economy.Now the banks are again fortifying the reserves.
JPMorgan Chase CEO Jamie Dimon made headlines Monday when he said a “very, very serious” mix of concerns could lead to a recession in the next six to nine months.
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