Economic Uncertainty: Bank Profits Down 70% From Previous Year

EDITOR NOTE: While the S&P 500 is up 7.33% year to date, the banking industry is at -32.33% (check the KBR banking industry index against the SPX). What’s behind all of these “losses”? Loan loss provisions. Banks are writing off current and forecasted loans from borrowers who they believe won’t pay back their debt. It tells us a lot about their intermediate term economic forecasts. Many of these banks supposedly have “strong” liquidity levels; the same can’t be said of those borrowing from them.

WASHINGTON, Aug 25 (Reuters) - U.S. bank profits were down 70% from a year prior in the second quarter of 2020 on continued economic uncertainty driven by the coronavirus pandemic, a regulator reported Tuesday.

Bank profits remained small as firms build up cushions to guard against future losses and business and consumer activity dropped, according to the Federal Deposit Insurance Corporation. Bank deposits climbed by over $1 trillion for the second straight quarter, and the regulator said the industry has “very strong” capital and liquidity levels. 

Originally posted on Reuters