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Bloomberg

Signals of declining bank lending Strength of the US economy after the blockade

(Bloomberg) – American banking giants JPMorgan Chase & Co. and Wells Fargo & Co. point out new problems in their credit business, but this is not the wave of defaults they feared a year ago. Bankers say borrowers are paying off balances and are no longer demanding funding as a sign that U.S. consumers and corporations are ready to stimulate economic recovery. Total loans at Wells Fargo fell 1

5% year-on-year to March, while for larger competitor JPMorgan they fell 4%, according to earnings reports on Wednesday. Lending to both businesses and households is declining – usually a dark sign of banks’ future profits, which has caused their stock prices to fall at the start of trading. But according to bank leaders, this suggests something positive for the US economy, stressing that millions of people and businesses, aided by government bailouts and stable debt markets, have managed their finances by blocking and are ready to unleash a surge in spending. “The consumer has so much money that they pay off their loan on credit – which is good,” JPMorgan CEO Jamie Dimon said on Wednesday. “So consumers have $ 2 trillion more money in their current accounts than they had before. This is also true for businesses, where businesses take advantage of huge market funding to raise a lot of money. ”The figures broaden the trend of the pandemic era: banks have not put accumulated deposits back into their traditional bread – and the lending business. JPMorgan loans At JPMorgan, the largest bank in the country, loans now account for 44% of its deposits, up from 57% this time last year and 64% two years ago. The 25 largest US banks, which collectively hold more than $ 10 trillion in deposits, have seen loans and leases fall 8 percent from a year earlier. lending and actual lending is now the widest of 36 years of Fed weekly data. It is easy for bank executives to identify the culprits for the downturn. The US government continues to fatten household finances through incentive checks and offer small businesses easy loans. The Fed has bought mortgage bonds and government securities at such a rate that it has reduced the cost of borrowing in the US economy to record lows, allowing corporations and other organizations to extract debt markets cheaply. “When they raise cash in public markets, they pay off bank loans,” Dimon said. “But this is not bad news for loan seeking. This is actually good news. “The silver lining was not enough to raise JPMorgan’s stock. It fell 1.8 percent at 3 p.m. New York time. Wales Fargo slipped before receiving signs of progress in overhauling the scandalous company. Bank of America Corp. and Citigroup Inc. will report quarterly results on Thursday. Lower lending and low interest rates affect the lower ranks of banks. At JPMorgan, net interest income fell to 40% of total revenue, the smallest quarterly share in at least a decade, according to data collected by Bloomberg. Wells Fargo’s interest income has fallen to its lowest share of the company’s revenue since 2012. The economy will be significantly more active in the second half of this year and households may start carrying larger sections of their credit cards then or A little later, JPMorgan CFO Jennifer Piepzak said, “As we accelerate the spread of vaccines, I hope we will soon move to a more normal lifestyle,” Wells Fargo CEO Charlie Scharf told analysts. “If the economy continues to grow, we would expect to see increased demand for loans from our commercial customers in the second half of the year.” Scharf added that many people have been abandoned by the recovery and may need more help. Lending standards It is difficult to understand how conservative banks have become when it comes to loans. One of the signs of their appetite for risk can be found in the loan default rates. The riskier the loan, the greater the chance that borrowers will fall behind. At JPMorgan, the share of mortgages, credit cards and car loans with a delay of at least 30 days fell by about half a percentage point compared to last year. Credit card interest rates this year are so far below the bank’s expectations before the pandemic, Piepszak told analysts. However, she told reporters, JPMorgan does not want to loosen its credit standards to lend more. For more articles like this, please visit us at bloomberg.com Subscribe now to stay ahead with the most trusted source of business news. © 2021 Bloomberg LP


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