Major US bank hedges against overdue debt and $4.5 trillion in provisions

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Major US banks braced for an increase in non-performing loans in the wake of the deteriorating macroeconomic outlook. and that JP Morgan, Goldman Sachs, Bank of America, Citi, Morgan Stanley and Wells Fargo They added provisions of $4,521 million at the end of the first half of 2022. A position that contrasts with the release of $17,408 million that the six entities added in the same period last year following the Covid pandemic. -19.

In general, in their latest quarterly reports, banks explain the reason for this increase in provisions for potential loss on customer loans. High inflation, war and recession in Ukraine In a North American country. In July, inflation in the United States fell to 8.5%, but remained high despite frequent rate hikes by the Federal Reserve in an attempt to cope and is currently between 2.25% and 2.5%. is within the limits of. ,

JP Morgan Explains in its quarterly report that the increase in provisions was motivated by “the potential for increased risk due to high inflation and the war in Ukraine as well as the risks associated with Russia”. It was the bank that provided the most provisions during the six-month period and totaled $2,564 million, or more than half of the reserves built up between the big six banks. The entity closed in the second quarter as planned and after making a provision of $ 1,101 million, it decided to stop the share buyback programs to comply with the new stricter capital requirements imposed by the Reserve federal.

For its part, Goldman Sachs 1,228 million. The entity indicates in its accounts that, in part, this cushion reflects the impact of portfolio growth (mainly in credit cards) and “broader macroeconomic concerns”.

In the same way, Bank of America, 471 million for a possible decline in lending, it says the cash-raising was “primarily driven by lending growth and a bleak macroeconomic outlook.”

Town, which issued more than 6.2 billion in the first half of last year, has reserves of 307 million. Morgan Stanley, which has made a provision of 158 million, also specifies that this is due to “the increase in the portfolio”.

Wells Fargo It is the only major U.S. bank that has continued to issue reserves built up during the pandemic. However, it hoarded 580 million for potential credit losses in the second quarter.

According to the FT, in late June the Federal Reserve imposed higher capital levels on JPMorgan, Bank of America and Citigroup after conducting stress tests to assess their ability to withstand an adverse scenario. So JPMorgan’s new CET1 requirement is 12% down from 11.2%, while Bank of America’s will drop from 9.5% to 10.5% and Citi’s from 10.5% to 11.5% . Additionally, JPMorgan and Citi, as well as Goldman Sachs, will be subject to an additional surcharge on their CET1 capital requirements of 50 basis points from next year due to their status as systemically important banks.

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