(CNN Business) – JPMorgan Chase informed investors Tuesday that it set aside $ 6.8 billion to protect against an expected wave of loan defaults. Wells Fargo is also preparing for trouble, spending $ 3.1 billion to protect itself against bad loans.
Jamie Dimon, chief executive of JPMorgan, said the first quarter had presented the bank with “unprecedented challenges.” The lender witnessed a record demand for renewable lines of credit as the coronavirus crisis deepened.
Companies turned to their lines of credit “probably twice the rate than in the financial crisis [de 2008]Dimon said on a earnings conference call. “I think companies are rationally ordering their liquidity ahead of what could be a significant recession,” he added.
JPMorgan economists now predict that unemployment in the United States will soar to 20% in the second quarter before recovering in the last six months of the year, with an annualized GDP contraction of 40% in the April-June period.
The accumulation of reserves at Wells Fargo “reflected the expected impact that these unprecedented times could have on our clients,” Chief Executive Officer John Shrewsberry said in a statement.
As we wrote on Tuesday, large banks have an excellent point of view from which to observe the consequences of the coronavirus pandemic. They have real-time data on the use of credit, as well as on the behavior of businesses and consumers.
As the world economy erupts in what the IMF considers to be the worst economic recession since the 1930s, it pays to pay close attention to what bank executives say and do.
There are more bank earnings on Wednesday, and reports from lenders such as Bank of America, Citigroup and Goldman Sachs are expected.
Investors will also get another round of economic data. US retail sales for March will be released at 8:30 a.m. ET, along with the Empire State Manufacturing report covering April. Industrial production data for March will be released at 9:15 a.m. ET.
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