America’s largest banks suffer a knockout blow to their bottom line as rising interest rates cause billions of dollars in loans to collapse.
JPMorgan Chase, Capital One and others lost $18.9 billion in the second quarter of this year on bad loans, reports say. financial times.
Banks are facing “discounts,” or losses on loans that are now classified as non-recoverable at a rate 17% higher than in the previous three months, and 75% higher than in 2022.
in Earnings call Last month, Capital One CEO Richard Fairbank said the US was emerging from an “unprecedented” credit environment that favored borrowers, and that some kind of consequence was inevitable.
“We have to remember that the credit performance we have seen over the past three years has been unprecedented…
So we think there’s some catching up happening on the other side of that, especially for consumers who otherwise might have been charging for the last three years.”
Banks are now preparing for loan losses to continue to rise, and have already set aside $21.5 billion in emergency funds to meet potential future losses.
The new loan loss figures come after Moody’s downgraded 10 regional banks and announced it was considering whether to downgrade a number of additional large lenders due to the potential for more deposit flight and an “erosion” of profitability.
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