Updated at 12:45 p.m. ET
The dramatic collapse of the U.S. economy from the coronavirus is pummeling America’s largest banks, raising new concerns about how much growth is slowing.
Wells Fargo lost $2.4 billion in the second quarter — its first quarterly loss since 2008 during the financial crisis — and said it expects to cut its dividend to shareholders by 80%. Citigroup saw its profit drop 73% in the quarter.
And JPMorgan Chase, the nation’s biggest bank, was forced to set aside billions of dollars more to cover bad loans during the second quarter, although money it made from trading in the frothy financial markets assured it made a profit anyway.
The results underscore the toll that the recession is taking on big banks, which serve as a barometer of how the broader U.S. economy is faring. Hopes that the economy will rebound as fast as it declined — a so-called V-shaped recovery — seem increasingly unlikely.
“We still face much uncertainty regarding the future path of the economy,” despite some positive economic data, CEO Jamie Dimon said in a statement.
With the financial markets booming, JPMorgan Chase made $9.7 billion from trading stocks and bonds, 79% more than a year earlier, largely because of the sharp rebound in stock prices since March.
Still, the bank anticipates bigger losses from commercial and consumer loans going sour, as the pandemic tightens its grip on the economy, and said it would set aside $10.5 billion to cover them. That’s in addition to the $8.3 billion it set aside during the first quarter.
JPMorgan Chase emerged from the 2008 financial crisis in better shape than any other big banks, but this downturn promises to be of a different character, Dimon told investors.
Government stimulus programs have delayed some of the impact of the recession, and that impact won’t be felt right away, Dimon said.
“This is not a normal recession. The recessionary part of this you’re going to see down the road,” he said.
Other banks also see a murky future and are preparing for a range of outcomes.
Citigroup CEO Michael Corbat said his bank is “prepared for a variety of scenarios and will continue to operate our institution prudently given this unprecedented situation.”
“We believe it is prudent to be extremely cautious until we see a clear path to broad economic improvement,” said Wells Fargo CEO Charles Scharf.