Citigroup, JPMorgan Chase, and Wells Fargo have expanded to $28 billion their pool of cash to cover loans that may begin to go bad as $600 weekly federal unemployment benefits run out at the end of this month.
The banks said the projected value of loans expected to fail is greater now than was expected at the end of the year’s first quarter.
The banks took the funds from their second-quarter profits.
Citigroup put aside $7.9 billion, about 73 percent of its quarterly profit. JPMorgan set aside $10.5 billion, halving its profit for the period. Wells Fargo reserved $9.6 billion and recorded its first quarterly loss in more than a decade.
JPMorgan said it raised its reserve because it now expects the economy to recover more slowly than previously thought and unemployment to remain in double digits for another 12 months or more.
Also, corporate, student, and consumer debt were at record levels before the economy stalled and tens of millions of people lost their jobs.
The economy is unlikely to recover “until a vaccine is available,” said Michael Corbat, Citigroup CEO.
“The banks don’t see a rapid recovery over the next six months,” agreed Harvard University economist Gabriel Reich. “They see a protracted recession.”
