August 3, 2020 10:00 am

US banks set aside 30 billion dollars for NPLs

Declining profits on the one hand, provisions for defaulted loans on the other: In view of the effects of the COVID-19 pandemic, the situation of the largest US financial institutions is currently anything but rosy. As the news agency Quartz reports, the six leading US banks have set aside an astounding USD 30 billion for loan defaults in the second quarter alone. The reasons for this precautionary measure were the poor economic outlook, rising unemployment figures and the increasing number of insolvencies in the United States.

The Bank of America has been hit particularly hard in recent months: The institution’s profits fell by more than half to USD 3.28 billion in the reporting period. No wonder then, that the financial institution was forced to build up significantly more reserves for loan defaults. Specifically, the Bank of America’s provisions for NPLs now amount to USD 5.1 billion – four billion more than at the beginning of the second quarter.

Goldman Sachs and Morgan Stanley are currently showing some more success. While the former US investment bank was able to increase its profits to USD 2.25 billion, the latter catapulted its surpluses by a full 45 percent to a record level of USD 3.2 billion. The profits of both banks are linked in particular to the capital market business.

Nevertheless, the two investment banks were also not spared an increase in their reserves for NPLs. At Goldman Sachs, the reserves amount to 1.6 billion US dollars; Morgan Stanley puts the total at 239 million US dollars. With regard to the current development in the third quarter, the majority of the largest US banks are looking to the future with concern: Even those institutions that focus particularly on capital market business will probably have to expect further declining earnings in the near future, according to the report. Quartz/Manager Magazin

This post was written by Jens Secker

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