JP Morgan Chase and Wells Fargo are preparing for a “severe recession”

JP Morgan Chase et Wells Fargo se préparent à une «sévère récession»

Photo: Timothy A. Clary Agence France-Presse
The containment measures taken to stem the spread of the coronavirus led to thousands of shops and businesses down the curtain and it is not certain that a large number re-open when the economy is going to leave.

The american banks JP Morgan Chase and Wells Fargo warned on Tuesday that they expected a “severe recession” in the u.s. economy, with an unemployment rate of 20 % in the second quarter, due to the pandemic of COVID-19, which should lead to a surge in unpaid bills from individuals and businesses.

The results of the first quarter of the two firms, which are, respectively, the first and fourth, u.s. banks, have confirmed the fears of the business community and policy : the devastation caused by the new coronavirus on the economy is colossal.

The net profit of JP Morgan Chase, which has had to temporarily close hundreds of agencies, has plunged from 69% to $ 2.9 billion, up from $ 9.2 billion in the first quarter of 2019. Wells Fargo, for its part, saw his advantage melt to 653 million, compared to a gain of 5.85 billion a year earlier. This deterioration in profitability is due to the epidemic, which has shut down the u.s. economy since mid-march, have explained the two banks.

“Given that it is likely to have a rather severe recession, it was necessary to build up reserves-related [activities] loans,” said Jamie Dimon, p.-d. g. of JP Morgan, adding that the first quarter had been marked by “unprecedented challenges, which required a focus on what a bank could do,” to remain solid.

The containment measures taken to stem the spread of the coronavirus led to thousands of shops and businesses down the curtain and it is not certain that a large number re-open when the economy is going to leave. Large companies, in search of cash, have scrambled to have immediate access to the credit lines they had opened for the banks to avoid bankruptcy.

Some 16 million Americans have registered as unemployed at the end of march and beginning of April. Many households and SMES are struggling to pay their bills and their loans to the consumer and to honour their monthly instalments.

Wells Fargo has suspended foreclosures of the homes of the clients could not repay their mortgages and deferred monthly payments on several consumer loans, while JP Morgan Chase has spread out the repayments of the car loans. Despite all these measures, JP Morgan Chase has set aside a total of 8.3 billion, the highest level since the financial crisis of 2008, to cover future payment defaults by its debtors. These reserves are up 6.8 billion more in a year. The reserves of Wells Fargo rose $ 3.2 billion year on year, to $ 4 billion.

JP Morgan Chase anticipates a jump in the unemployment rate to 20 % in the second quarter, but a decline in the fourth quarter.

Share Button

Add a Comment

Your email address will not be published. Required fields are marked *