Citigroup and JPMorgan Chase announced Tuesday that they have each set aside more than $7 billion to cover potential losses on loans to customers hurt by the coronavirus pandemic, causing their profits to plummet.
Both New York banks saw their profits fall by more than half in the second quarter due to the increased need to stockpile reserves, but both also saw their revenues rise from a year earlier.
“Savings are up. Incomes are up. Home prices are up,” JPMorgan CEO Jamie Dimon said during the bank’s second-quarter earnings call with analysts. “You will see the effect of this recession. You’re just not going to see it right away.”
JPMorgan Chase also said it was preparing for double-digit unemployment through the first half of 2021 with expectations of “much more protracted” pain as increases in coronavirus cases keep parts of the economy shuttered.
The bank’s financial models predict a large number of loan defaults in the coming year, particularly if the coronavirus pandemic cripples the U.S. economy for longer than expected.
“Despite some recent positive macroeconomic data and significant, decisive government action, we still face much uncertainty regarding the future path of the economy,” Dimon said.
Dimon added that although the federal government’s massive relief efforts and expanded unemployment benefits are providing support to businesses and consumers for the time being, this wasn’t a permanent solution.
