Tom D
Elite Member
- Joined
- May 22, 2015
- Professional Status
- Certified Residential Appraiser
- State
- Pennsylvania
With interest rates sitting at more than two-decade highs and inflation continuing to bear down on consumers, big banks are preparing to face more risks from their lending practices.
In the second quarter, JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo all raised their provisions for credit losses from the prior quarter. These provisions are the money that financial institutions set aside to cover any potential losses from credit risk, including delinquent or bad debt and lending, like commercial real estate (CRE) loans.
In the near term, the banks are projecting slowing economic growth, a higher unemployment rate, and two interest rate cuts later this year in September and December, Narron said. That could mean more delinquencies and defaults to close out the year.
The built-up stores show banks bracing for a riskier environment, where both secured and unsecured loans could create bigger losses for some of the nation’s largest banks. A recent analysis of household debt by the New York Fed found that Americans owe a collective $17.7 trillion on consumer loans, student loans, and mortgages.
In the second quarter, JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo all raised their provisions for credit losses from the prior quarter. These provisions are the money that financial institutions set aside to cover any potential losses from credit risk, including delinquent or bad debt and lending, like commercial real estate (CRE) loans.
In the near term, the banks are projecting slowing economic growth, a higher unemployment rate, and two interest rate cuts later this year in September and December, Narron said. That could mean more delinquencies and defaults to close out the year.
The built-up stores show banks bracing for a riskier environment, where both secured and unsecured loans could create bigger losses for some of the nation’s largest banks. A recent analysis of household debt by the New York Fed found that Americans owe a collective $17.7 trillion on consumer loans, student loans, and mortgages.
