Optimism in the US banking industry is being threatened by a growing pile of bad loans, putting pressure on the sector’s biggest players.
Bloomberg analysts say non-performing loans, or loans to debtors that haven’t made a payment in over 90 days, rose to a combined $24.4 billion in the last quarter of 2023 for JPMorgan Chase, Bank of America, Wells Fargo and Citigroup, reports the Financial Times.
The numbers represent a $6 billion increase year over year.
Bank earnings likely shrunk in the final three months of 2023 due to the unpaid loans, plus the rising cost of deposits stemming from higher interest rates, the analysts say.
FT reports that the banks are taking several cost-cutting measures to deal with the new business climate. Citigroup is reportedly taking a hit to deal with layoffs and related expenses, while Wells Fargo has already set aside $1 billion for severance packages.