The dramatic collapse of the U.S. economy from the coronavirus is pummeling America’s largest banks.
Wells Fargo lost $2.4 billion in the second quarter — its first quarterly loss since 2008 during the financial crisis — and said it expects to cut its dividend. Citigroup saw its profit drop 73% in the quarter.
And JPMorgan Chase, the nation’s biggest bank, was forced to set aside billions of dollars more to cover bad loans during the second quarter, but money it made from trading in the frothy financial markets assured it made a profit anyway.
“We still face much uncertainty regarding the future path of the economy,” despite some positive economic data, CEO James Dimon said in a statement.
The bank anticipates bigger losses from commercial and consumer loans going sour, as the pandemic continues its grip on the economy, and said it would set aside $10.47 billion to cover them. That’s in addition to the $8 billion it set aside during the first quarter.
Dimon said JPMorgan Chase would continue to pay its dividend, “unless the economic situation deteriorates materially and significantly.”
More so than any other big bank, JPMorgan avoided a loss during the financial crisis, and its performance is seen as a barometer of what to expect as other banks release their earnings this week.
The bank made $9.7 billion from trading stocks and bonds, 79% more than a year earlier.
Citigroup CEO Michael Corbat said his bank is “prepared for a variety of scenarios and will continue to operate our institution prudently given this unprecedented situation.”
In explaining his bank’s dividend cut, Wells Fargo CEO Charles Scharf also cited the uncertain economic outlook. “We believe it is prudent to be extremely cautious until we see a clear path to broad economic improvement,” he said.