Sat, April 27, 2024 at 16:54

• 

  Kang-hoon

  • Hello Annie.

  • Today's news is about the two largest banks in the US, JPMorgan Chase and Bank of America.

  • They're expecting a combined loss of $4.5 billion from customers who can't pay their bills.

  • 
• Annie

  • Oh no!😮 That's a huge amount!

  • Why are they expecting such losses?

  
• 

  Kang-hoon

  • Well, JPMorgan Chase reported that its net charge-offs, which are debts they don't expect to receive, hit $2 billion in the first quarter of this year.

  • 

  • That's nearly twice the amount of unrecoverable debt compared to the same quarter last year.

• Annie

  • Wow, that's a significant increase!😲 And what about Bank of America?

  
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• 

  Kang-hoon

  • Bank of America reported $1.5 billion in net charge-offs, a surge from $807 million a year prior.

  • They say these losses mainly come from credit card debt that will likely never be paid.

• Annie

  • That's terrible!😥 So, why are these debts becoming unrecoverable?

  
• 

  Kang-hoon

  • Bank of America is seeing cracks in the finances of borrowers with below-prime credit scores.

  • 

  • Their household spending is affected by higher interest rates and inflation.

  • This makes it difficult for them to repay their debts.

• Annie

  • Oh, I see...😔 So, how are other banks doing?

  
• 

  Kang-hoon

  • Net charge-offs are also on the rise at Citigroup and Wells Fargo.

  • A recent poll from the Federal Reserve finds most banks are now tightening lending standards for most types of loans.

• Annie

  • That sounds like a tough situation for everyone.😓 But, are JPMorgan Chase and Bank of America doing okay despite these losses?

  
• 

  Kang-hoon

  • Despite the losses, both JPMorgan Chase and Bank of America say their balance sheets are sound.

  • 

  • JPMorgan Chase earned $49.6 billion in profit last year, while Bank of America earned $24.9 billion.

• Annie

  • Phew!

  • That's a relief.😌 So, is this news good or bad?

  • And how will it affect the market?

  
• 

  Kang-hoon

  • Unfortunately, this news is bad.

  • It shows that many people are struggling to pay their debts, which could lead to a slowdown in consumer spending.

  • This could negatively impact the economy and the stock market.

  • Upon comprehensive consideration, this news is perceived as a 😱Bearish.