Analysts at rating agency Standard & Poor's Global Ratings have warned that the coronavirus crisis could wipe out U.S. banking profits for the entire year and plunge the industry into losses for the first time in more than a decade.
The agency's report on the impact of slumping interest rates and soaring customer defaults depicts the worst-case scenario, which represents a huge reversal of wealth. department Earned $ 195 billion last year.
S & P analysts wrote: "The liquidity and uncertainty of the current situation make it difficult to predict the level of stress that banks will endure." The number of U.S. coronavirus cases climbed to 64,000 on the day, second only to China and the United States worldwide. The highest level. Italy.
Stock market investors have already ruled on how Bank of America will operate. Coronavirus crisisOver the past month, the KBW Bank Index has fallen by 36%, while the S & P 500 Index has fallen by 26%.
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The sharp drop in bank stock prices reflects fears that loan losses could increase, possibly due to massive defaults by unemployed individuals and companies that were forced to close during the pandemic.
Investors also worry about impact of Fed emergency interest Cut interest rates Bank profits, because bank loan margins are higher when interest rates are high.
Standard & Poor's said the two crises "will lead to a significant decline in bank revenue and may significantly reduce asset quality, especially in industries more affected by the virus outbreak."
The extent to which bank profits are hit will depend on the extent of the spread of the coronavirus, the timing of the economic blockade, and the effectiveness of federal government programs Stimulation plan And post-crisis unemployment.
In severely unfavorable circumstances, as loan losses far exceed the industries currently under pressure, and U.S. consumers are “ more meaningfully affected '', calculated by Standard & Poor's, from 2020 Starting in the second quarter of this year, banks will lose a total of $ 15 billion in one year. This will be their first loss since 2009.
The report said that under more moderate circumstances, annual revenue would fall to $ 100 billion. "The liquidity and uncertainty of the current situation make it difficult to predict the level of stress that banks will endure," analysts said.
Neither case includes the consequences of patience, where people are told they can suspend their repayments. Some banks have announced payment and interest holidays. Tolerance means that banks immediately lose interest income and may also cause reclassification of loans in accordance with regulatory guidelines, leading to financial losses, although regulators have hinted that they will support banks that work with customers.
The program does not include new impacts Accounting measures This "may accelerate" loan losses.