Big banks are preparing for a potential wave of customer defaults as economic uncertainty grows.
JPMorgan Chase, Bank of America, and Wells Fargo are all increasing their financial reserves to cover potential losses from credit card and loan defaults.
JPMorgan Chase is leading the charge, increasing its reserves by a whopping $1.17 billion. The bank now has $3.05 billion set aside, compared to $1.88 billion in the first quarter.
Bank of America and Wells Fargo are also beefing up their reserves. Bank of America increased its reserves by $200 million to $1.5 billion, while Wells Fargo added $300 million to reach $1.24 billion.
These moves suggest that banks are expecting a tougher economic environment in the coming months. This is driven by several factors, including:
- A struggling commercial real estate market.
- Consumers carrying a record $1.02 trillion in credit card debt.
- Rising delinquency rates across various types of debt.
Overall household debt in the US hit a record $17.69 trillion in the first quarter of 2024. This includes mortgage balances, which rose to $12.44 trillion, and auto loans, which reached $1.62 trillion.
These trends are raising concerns about the potential for a rise in customer defaults.
Banks are taking steps to protect themselves, but it remains to be seen how the economic landscape will unfold in the months ahead. /p>
