Profits plunge across Big 4 US Banks

But the reality is a little different

Image Courtesy: Forbes

First-quarter profits across the big 4 US banks, Bank Of America, J.P Morgan Chase, Wells Fargo, and Citibank plunged as they set aside money to cover for loan defaults.

1. Revenue declined by 1% for Bank of America, 18% for Wells Fargo, 3% for J.P Morgan, and increased 12% for Citigroup.
2. Profits fell by 45% for Bank of America, 89% for Wells Fargo, 70% for J.P Morgan, and 46% for Citigroup.

When compared to the drop in revenue, bottom-line (profits) took an outsized hit because banks decided to provision money to cover for losses they are expecting due to an increase in loan defaults.

Provision for Credit Losses: Current Quarter vs Previous Quarter

The big four have now set aside nearly $22 billion to cover for soured loans compared to less than $4 billion they had provisioned in the previous quarter. The fivefold increase is a clear sign that banks are preparing for the worst as they don't want to be caught off guard.

Bank of America: $4.76 billion vs $941 million

Wells Fargo: $4 billion vs $800 million

J.P Morgan: $8.29 billion vs $1.49 billion