According to the latest reports, it seems that Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo are risking losing a load of cash due to recent events. Check out the latest reports about this below.
Huge banks risk losing a lot of money
The US banking industry’s confidence is under threat due to a growing number of bad loans, which is putting pressure on the biggest players in the sector.
Bloomberg analysts have reported that non-performing loans, which are loans given to debtors who have not made any payments in over 90 days, have reached a combined total of $24.4 billion in the last quarter of 2023 for JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup. This figure is a $6 billion increase compared to the previous year.
The analysts have also predicted that bank earnings are likely to have decreased in the final three months of 2023 due to the unpaid loans as well as the increasing cost of deposits, which is a result of higher interest rates.
According to a report by FT, the banks are taking measures to cut costs in response to the new business environment. Citigroup is reportedly dealing with layoffs and related expenses, while Wells Fargo has already set aside $1 billion for severance packages.
Despite the increase in bad loans, the largest US banks are expecting a shift in trend by reducing how much capital provisions they set aside for future non-performing loans.
Desmond Lachman, a former Deputy Director at the International Monetary Fund’s (IMF) Policy Development and Review Department, recently mentioned that regional banks are also in a precarious position.
About 18% of their loan portfolios are in the troubled commercial real estate industry.
Says the IMF insider,
“Major property investors, such as Brookfield and Blackstone, are starting to walk away from their mortgages, Lachman noted.
The scenario makes it more likely that commercial property owners will, possibly by next year, start defaulting on their loans. That would be very bad news for small and mid-size banks.”
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