NEW YORK, Apr 15 — Turmoil in financial markets created some profitable opportunities for large banks in the first quarter, but results released Wednesday underscored the industry’s expectations for a potentially deep US recession.
Trading divisions at large banks garnered boom-like revenue jumps as turmoil in financial markets prompted more transactions of equities and bonds.
But Citigroup, Bank of America and Goldman Sachs each set aside large sums of money in case of bad loans, significantly denting profits and reflecting expectations for potentially major defaults in a slowing US economy amid deep uncertainty over how long the coronavirus shutdowns will last.
The measures follow similar announcements Tuesday from JPMorgan Chase and Wells Fargo, as executives warned of a potentially deep recession that could keep growth weak for the foreseeable future.
Citigroup has been testing its loan book against a wide array of economic scenarios, including ones where unemployment reaches 15 per cent and US growth contracts by as much as 40 per cent, said Chief Financial Officer Mark Mason.
“We would imagine those would be severe-type scenarios,” Mason told reporters on a conference call, “but we’re in touch across our firm to make sure we can manage that.”
Mason said the bank’s credit card business saw a decline of 30 per cent in sales at the end of the March and “we’ve continued to see that pressure play through in April.”
Citigroup set aside around US$7 billion (RM30.4 billion) in the first quarter in case of defaults, leading to a 46 per US $20.7 billion.
Mason said the bank could delay some spending, such as marketing for credit cards, depending on how conditions evolve.
Bank of America, the biggest US bank by assets after JPMorgan Chase, set aside US$4.8 billion for potential defaults, US$3.6 billion of which was added in the first quarter.
Bank of America reported quarterly profits of US$3.5 billion, down 48.4 per cent from the year-ago period.
Feast or famine
Meanwhile, Goldman Sachs reported profits of US$1.1 billion, down 49 per cent from the year-ago period. Revenues dipped one percent to US$8.7 billion.
Goldman set aside US $22.30, while Goldman Sachs shed 2.4 percent to US$173.90. — AFP
