Big US Banks Set Aside Billions in Downturn Warning; Stocks Continue to Tumble


The markets started to see red as investors grew worried about an uptick in coronavirus infections slowing the economic recovery when they kicked higher later in the day yesterday after the banks earning season kicked off.

The Dow Jones Industrial Average raced higher with its biggest percentage advance of the month. S&P 500 also spiked 1.7%, which can be further driven by a good performance by the banks’ stocks.

Bitcoin meanwhile continues to hover around $9,215 as it has been doing for about a month now. The volume remains extremely low while Tether is recording more than double the bitcoin’s ‘real’ trading volume, as per Messari.

The first earnings report showed that Wells Fargo took a $2.4 billion loss, the first quarterly loss since 2008. The earnings declined due to low-interest rates, uncertainty associated with COVID-19, and a worse-than-expected macro environment.

The surprise came in the form of JPMorgan, which topped its revenue estimated at $33 billion, up from 15% from the same quarter last year while profits dropped over 50%. Citigroup also reported revenue of $19.8 billion but a drop of 73% in profits from last year.

This was because of trading revenue driven by massive volatility in the market and the Fed injecting liquidity while purchasing corporate bonds as such, not sustainable.

Banks stocks are currently down with Wells Fargo losing as much as 45% in yearly returns. The shares of Wells Fargo and Citigroup fell 5.4% and 2.8%, respectively, yesterday with little changes in JPMorgan’s.

While both Citibank and JPMorgan Chase beat their estimated earnings, they didn’t put out an optimistic outlook.

JPMorgan CEO Jamie Dimon warned that the bank still “faces much uncertainty regarding the future path of the economy.”

All three of the banks meanwhile continue to stockpile billions; Citibank added $5.6 billion in the Q2 2020 while Wells Fargo and JPMorgan added $8.4 billion and $11 billion respectively to prepare for things to get worse.

Although government aid cushioned the economic fallout from the pandemic so far, bank executives said as the programs begin to expire in the coming months, the banks expect their losses to mount as defaults will rise.

“The banks are pessimistic about the course of the recovery,” said Gabriel Chodorow-Reich, associate professor of economics at Harvard University. “The banks don’t see a rapid recovery over the next six months — they see a protracted recession.”

Amidst this, Lael Brainard, a Federal Reserve governor, warned that “a broad second wave could reignite financial market volatility and market disruptions at a time of greater vulnerability.”

Get Daily Headlines

Enter Best Email to Get Trending Crypto News & Bitcoin Market Updates

What to Know More?

Join Our Telegram Group to Receive Live Updates on The Latest Blockchain & Crypto News From Your Favorite Projects

Join Our Telegram

Stay Up to Date!

Join us on Twitter to Get The Latest Trading Signals, Blockchain News, and Daily Communication with Crypto Users!

Join Our Twitter

Add comment

E-mail is already registered on the site. Please use the Login form or enter another.

You entered an incorrect username or password

Sorry, you must be logged in to post a comment.
Bitcoin Exchange Guide