NEW YORK - Three major US banks have set aside an additional US$23 billion as a backstop against bad loans, highlighting the brittle state of the US economy due to the coronavirus pandemic, the companies said on Tuesday .
The three banks suffered a collective hit of US$5 billion from bad loans in the latest quarter, and while executives said they hoped that would mark the deepest hit from credit issues, they acknowledged that the health of the loans depends on the evolution of Covid-19. Corbat said consumer spending in states with bad Covid-19 trends had declined somewhat in recent weeks, but not as much as in the"darkest days" earlier in the spring.
Meanwhile, Citigroup added US$5.6 billion in reserves also due to"deterioration" of the outlook, as well as downgrades in loan quality due to the virus, the bank said in a statement. However, Wells Fargo reported a loss of US$2.4 billion, compared with US$6.2 billion in profits in the year-ago period. The bank, which unlike the others does not have major trading division, said it was cutting its dividend to 10 cents a share from 51 cents.
While the bank reported a loss in consumer and commercial banking, it garnered a big profit increase in its corporate and investment bank division, while trading revenues soared amid volatility in financial markets.
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