Wall Street prepares for a wave of loan losses

IF DOCTORS AND nurses are on the front-line of the health crisis caused by the pandemic, then bankers are on the front-line of the economic response. Investors dumping stocks have stuffed the money into bank deposits. Cash-strapped businesses are drawing down credit lines. Laid-off workers are delaying mortgage payments. And governments are stepping in to dole out cash to firms in need, using the banks as their delivery system.

So when American lenders reported their first-quarter earnings on April 14th and 15th, the results revealed how customers are coping with the pandemic. JPMorgan Chase, the country’s largest bank, said that credit-card transaction volumes at supermarkets in March were twice those in March 2019. Bank of America reported that a sixth of its small-business customers have deferred loan payments.

Banks’ balance-sheets have swollen as they have issued loans to firms, creating new deposits. Loans outstanding at JPMorgan, Bank of America, Citigroup, Goldman Sachs and Wells Fargo grew from $3.8trn to $4.0trn between the end of last year and March 31st. (America’s other big beast, Morgan Stanley, was due to report results as The Economist went to press.) A torrent of trading in financial markets pushed transaction volumes to new highs. As a result, trading revenues were up by 32% at...

via The Economist: Finance and economics Business Feeds

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