In today’s environment of high inflation and rising interest rates, many U.S. consumers are struggling to make ends meet. Housing and rent costs are at unprecedented highs, and credit card debt recently surpassed $1 trillion dollars. Sky high interests are causing billions of dollars in losses as loans fall apart.
With all of these economic stressors, many Americans are falling behind on credit card and house payments.
In a recent report, U.S. Banks including JPMorgan Chase and Capital One suffered $18,900,000,000 in losses from bad loans in just the 2nd quarter of 2023 alone.
Source: BankRegData/Financial Times
Banks are now scrambling to set aside contingency funding as this trend shows no sign of abating in the near future.
In a recent CNBC Report, Fitch Ratings warned that it may be forced to downgrade dozens of banks, including JPMorgan Chase as the scrutinizethe health of large and regional banks.
The slew of bad loan charge-offs are contributing to mixed stock performance in the banking sector.
- Capital One (COF) shares have climbed from $88 to $101 since the beginning of 2023.
- JPMorgan Chase (JPM) has risen from $130 to $147
- Bank of America (BAC) has fallen from $33 to $28 per share since January.
- Citigroup (C) also fell from $45 to $41 for the year.
An article in Investopedia warns that borrowing could become more expensive as banks face potential downgrades from ratings agencies.
Buckle up. It could be a bumpy ride until interest rates come back down and inflation is held in check.