Three of the nation’s biggest banks revealed yesterday that they had set aside billions of dollars to cover potential losses on loans, signaling that they don’t expect consumers and corporations to be able to pay their debts in the coming months as the pandemic continues to gut employment and commerce, the New York Times reported. Collectively, JPMorgan Chase, Citigroup and Wells Fargo have put aside $25 billion during the second quarter, they said. As a result, their quarterly profits plunged. It was Wells Fargo’s first quarterly loss since 2008. Bank executives said that government aid had so far cushioned the economic fallout from the coronavirus pandemic, which sent millions of workers home beginning in March as cities and states began to shut down. These federal programs, meant to help tide Americans over the worst of the crisis, include a $600 weekly supplement to unemployment benefits. But as the programs begin to expire in the coming months, banks expect their loan losses to mount because defaults will probably rise. JPMorgan is preparing for the unemployment rate to remain in double digits for the rest of the year. Wells Fargo, too, set its unemployment forecast for 10 percent until the end of 2020. Its chief executive, Charles W. Scharf, said the bank’s views “on the length and severity of the downturn deteriorated substantially” over the past three months.
