Banks stockpile $28 billion to cover losses as businesses default on their loans

 

While many heralded the recent positive job reports as signs of an upward economic swing, reality has begun to set in for America’s largest banks—and it isn’t pretty. After announcing hits to their second quarter profits, executives sounded the alarm that the economic pain has only just begun. According to the Wall Street Journal:

“Hard-hit industries like retail and hotels are already struggling financially, but executives said they now expect the downturn to hit a wide range of businesses.

“‘May and June will prove to be the easy months in terms of this recovery,’ said Jennifer Piepszak, JPMorgan’s CFO. ‘Now we’re really hitting the moment of truth in the months ahead.’”

Indeed, the banks’ predictions are so dire they have stockpiled a collective $28 billion to cover expected losses as businesses start to default on their loans as enhanced unemployment benefits expire at the end of this month and the Paycheck Protection Program runs its course. In some cases, PPP loans have left businesses with even more debt as the economy is set to crater further downward as a second wave of state shutdowns ripples across the country.

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