Major banks like JPMorgan Chase, Wells Fargo, and Bank of America are struggling with a growing wave of bad debt. The Federal Deposit Insurance Corporation (FDIC) reports that banks wrote off a record $21.3 billion in the second quarter of 2023, mostly due to people struggling to pay their credit card bills.
Credit Card Delinquencies Reach a High
This is the highest quarterly charge-off rate since 2013, with credit card delinquencies hitting a 12-year high. The FDIC says the charge-off rate for credit cards reached 4.82% in the second quarter, the highest since 2011.
Banks Feeling the Pinch
The rising cost of living and higher interest rates are making it harder for people to keep up with their payments. JPMorgan Chase, Wells Fargo, and Bank of America all reported significant losses in the second quarter, with JPMorgan Chase writing off $2.2 billion, Wells Fargo $1.3 billion, and Bank of America $1.5 billion.
Overall Banking Profits Still Up
Despite the bad debt, overall profits for US banks are still strong. The FDIC reports that banks earned $71.5 billion in the second quarter, up from the previous quarter.
This situation highlights the challenges banks are facing as consumers struggle with inflation and rising interest rates. It remains to be seen how long these trends will continue and what impact they will have on the broader economy.
