Banks are Bracing for Consumers to Stop Paying Off Their Credit Cards
Banks are Bracing for Consumers to Stop Paying Off Their Credit Cards, reports Credit & Collection e-newsletter on 7/24/24
With interest rates sitting at more than two-decade highs and inflation continuing to bear down on consumers, big banks are preparing to face more risks from their lending practices. In the second quarter, JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo all raised their provisions for credit losses from the prior quarter. These provisions are the money that financial institutions set aside to cover any potential losses from credit risk, including delinquent or bad debt and lending, like commercial real estate (CRE) loans. JPMorgan, Citigroup, Bank of America, and Goldman Sachs have weaknesses in their bankruptcy plans. The 5 states where people have the most mortgage debt — and 5 where they have the least. JPMorgan built up $3.05 billion in provision for credit losses in the second quarter; Bank of America had $1.5 billion in stores; Citi more than tripled its credit reserve build from the prior quarter to $68 million; and Wells had provisions of $1.24 billion. The built-up stores show banks bracing for a riskier environment, where both secured and unsecured loans could create bigger losses for some of the nation’s largest banks. A recent analysis of household debt by the New York Fed found that Americans owe a collective $17.7 trillion on consumer loans, student loans, and mortgages.