Reports from the second quarter show that huge US banks are now getting ready for millions of people to stop paying their debts. To cover these losses, the banks are increasing their capital.
As they get ready for fewer customers, big banks like JPMorgan Chase, Bank of America, and Wells Fargo are strengthening their financial defenses. This will make it harder for the average American to pay their bills.
According to the most recent financial reports from major banks for Q2 2024, they are putting aside a lot more capital to cover possible losses from rising credit card and loan defaults.
Altogether, these banks are putting billions of dollars into emergency funds and loan loss reserves to get ready for more bankruptcies and loans that aren’t being paid back.
This shows that banks are getting more worried about the possibility of more people not paying their credit cards or loans in the coming months.
By increasing the amount of capital that can handle losses, banks are trying to lower the financial risks that come with a possible rise in credit-related defaults and bankruptcies.
This means the banks think the quality of consumer credit will get worse and are taking smart steps to make their balance sheets stronger and more resistant to bad credit trends.
The big rise in these emergency loan loss provisions across the banking sector shows that banks are getting ready for an economic slowdown that could cause more loans to go into default and credit-related write-offs.
This move shows that banks are trying to get themselves in a better position to handle any problems that might come up in the credit markets.
With a jump of $1.17 billion, JPMorgan Chase is the first bank to do this. Its reserves went from $1.88 billion in the first quarter of this year to $3.05 billion.
Bank of America has set aside $1.5 billion, which is more than the $1.3 billion it set aside in the last quarter. Wells Fargo has set aside $1.24 billion, which is more than the $938 million it set aside in the last quarter.
According to TransUnion, the huge rise in credit card balances shows that banks are expecting the economy to become more risky in the coming months. This is because commercial real estate is failing and people are racking up huge credit card bills.
Late payment rates for different types of debt are already going up. According to the New York Federal Reserve, total US family debt reached $17.69 trillion in the first quarter of this year, up $184 billion from the previous quarter.
This number includes the balances on mortgages, which went up by $190 billion to $12.44 trillion, and car loans, which went up by $9 billion to $1.62 trillion.
