The great bank of the USA shields itself against delinquent credit and provisions 4,500 million dollars | companies

Large US banks have braced themselves against a rise in non-performing loans in the face of deteriorating macroeconomic prospects. And it is that JP Morgan, Goldman Sachs, Bank of America, Citi, Morgan Stanley, and Wells Fargo they added provisions for 4,521 million dollars at the end of the first half of 2022. A situation that contrasts with the release of 17,408 million that the six entities added in the same period of the previous year, after the Covid-19 pandemic.

In general, in their latest quarterly reports, the banks explain that this increase in provisions for possible losses on loans to customers is due to the high inflation, the war in Ukraine and the drums of recession in the North American country. In the month of July, inflation in the US moderated to 8.5%, but it remains at a high level despite the continuous rate hikes by the Federal Reserve to try to combat it and which are currently in a range of between 2.25% and 2.5%.

J. P. Morgan points out in its quarterly report that the increase in provisions was driven by “the increase in the probability of risks due to high inflation and the war in Ukraine, as well as the exposure associated with Russia.” It is the bank that provided the most provisions in the semester and totals 2,564 million dollars, more than half of the reserves constituted among the six large banks. The entity closed a second quarter below expectations and after provisioning 1,101 million, it decided to stop the share buyback programs to comply with the new stricter capital requirements imposed by the Federal Reserve.

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

Similarly, Bank of America, which has provisioned 471 million for possible deterioration in loans, points out that the collection of liquidity was driven “mainly by the growth of loans and a discouraging macroeconomic outlook.”

citi, which released more than 6.2 billion in the first half of last year, has reserves of 307 million. Morgan Stanley, which has provisioned 158 million, also points out that it is due to “an increase in the portfolio.”

Wells Fargo it is the only one of the large US banks that has still continued to release provisions made during the pandemic. However, in the second quarter it stockpiled 580 million for possible credit losses

At the end of June, the Federal Reserve imposed higher capital levels on JP Morgan, Bank of America and Citigroup after carrying out stress tests to assess their ability to withstand an adverse scenario, according to the FT. In this way, JP Morgan’s new CET1 requirement is 12%, compared to 11.2%, while Bank of America’s will increase from 9.5% to 10.5% and Citi’s will go from 10, 5% to 11.5%. Additionally, JP Morgan and Citi, along with Goldman Sachs, will also 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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