US banks JPMorgan, Citi profits improve amid signs of recovery

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US banks JPMorgan, Citi profits improve amid signs of recovery

Wednesday, October 14, 2020

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CHARLOTTE, North Carolina (AP) — Two of the biggest banks in the United States, JPMorgan Chase and Citigroup, said yesterday that their profits improved markedly over the summer, as the US economy tried to bounce back from the coronavirus shutdowns that were imposed earlier this year.

Even so, both banks warned that much uncertainty remains about where the US economy is headed, and top bank executives bluntly said there is a need for another economic stimulus package to keep the economy from slipping into recession again.

“A good, well-designed stimulus package will simply increase the chance we get better outcomes,” said JPMorgan's Chairman and CEO Jamie Dimon in a conference call with reporters.

Both Citi and JPMorgan set aside fewer funds to cover potentially bad loans, contributing to the improvement in their third-quarter results. These loan-loss reserves, as they are known, are funds banks put aside when borrowers stop paying on their loans or there are economic signals that show a potential for more loans to go bad.

In the first months of the pandemic, banks set aside tens of billions of dollars to guard against bad loans as state and local economies came to a halt and millions of workers were laid off. Citi itself reserved about US$15 billion over the first two quarters of 2020.

But in the third quarter, many cities and states started reopening their economies in phases — restaurants were allowing diners to sit outside and businesses brought limited numbers of workers back to the offices, among other actions. Many economic indicators have markedly improved since the pandemic shutdowns of April and May. For instance, unemployment, albeit still high, is down from historic records earlier in the year.

This has led a good number of investors and economists to predict that — at least economically — the worst is over when it comes to the pandemic.


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