Two of the largest US banks are announcing a $4.5bn loss on debts that customers are unable to pay, The Daily Hodl reported.
JPMorgan Chase reported that its net charge-offs, debts the bank did not expect to receive, reached $2bn in the first quarter of this year, according to Reuters.
Meanwhile, Bank of America (BofA) reported net charge-offs of $1.5 billion, up from $807 million a year earlier. BofA claims these losses are primarily due to credit card debt that will likely never be paid, according to Chief Financial Officer Alastair Borthwick.
“Bank of America is seeing ‘cracks’ in the finances of borrowers with below-prime credit scores whose household spending is affected by higher interest rates and inflation. While lenders earn money from interest payments, they seek to avoid situations in which customers fall so far behind on loans that they have to be written off.”
Net charge-offs are also rising at Citigroup and Wells Fargo, as a recent Federal Reserve survey indicates that most banks are now tightening lending standards for most types of loans.
Banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs). Moreover, for credit card, auto, and other consumer loans, standards reportedly tightened, and demand weakened on balance.
Despite the losses, JPMorgan Chase and Bank of America both report that their balance sheets are in order. JPMorgan Chase made $49.6 billion in profit last year, while Bank of America earned $24.9 billion.
