The largest US banks are this week set to report the biggest jump in loan losses since the onset of the coronavirus pandemic, as rising interest rates pile mounting pressure on borrowers across the economy.
The publication of second-quarter results is set to show that banks have benefited from higher interest rates to some degree, by boosting lending and investment income. But after three years of relatively low defaults, in part fuelled by pandemic-era stimulus cash and other government assistance, lenders are also starting to see the negative effects of higher rates and inflation on borrowers.
The nation’s six largest banks — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — are predicted to have written off a collective $5bn tied to defaulted loans in the second quarter of this year, according to the average estimates of bank analysts, as compiled by Bloomberg.