As homeowners and other borrowers seek debt relief during the coronavirus pandemic, America’s four largest banks report at least $151.5 billion in loans with payments in deferral at midyear, Bloomberg L.P. reported [1].
JPMorgan Chase & Co. [2], Bank of America Corp. [3], Citigroup Inc. [4], and Wells Fargo & Co. [5] disclosed deferral details within their second-quarter filings with the U.S. Securities Exchange Commission.
“Uncertainty over the length of the pandemic and resulting economic crisis have made it difficult for banks to determine how many loans are likely to sour,” noted Stephen Lubbers for Bloomberg L.P. “JPMorgan, Bank of America, Citigroup, and Wells Fargo set aside more than $32 billion for loan losses in the second quarter, close to a record, signaling that relief programs may not be enough to stave off a flood of bad debt.”
Deferral programs differ among account types and banks. JPMorgan Chase & Co., for example, has offered clients rolling, three-month deferrals for up to a year on residential mortgages.
The four biggest U.S. banks vary on how they report payment deferrals and loan modifications, and the total balance of financing with deferred payments is likely higher than the aforementioned $151.5 billion.
Deferrals on residential mortgages and home-equity loans were a common theme for all four banks. The majority of Wells Fargo’s consumer deferrals were on a combined $35 billion of first and second mortgages, representing 12% and 10% of each loan type, respectively. Almost 9% of JPMorgan’s residential real estate portfolio was subject to payment deferrals, representing nearly three-quarters of the total $28.3 billion of consumer loans in deferral.
Wells Fargo reported $44.2 billion of consumer loans in deferral at midyear. The bank reported only that it modified $38.2 billion of commercial loans without disclosing the amount remaining in deferral by June 30.
Citigroup modified about $20 billion of consumer loans globally as of June 30. Bank of America, which provided figures as of July 23, was deferring payments on $7.7 billion in commercial loans and $28.5 billion in consumer and small-business debt.
Last spring, reportedly, millions of households narrowly avoided financial devastation thanks to the banks' rapidly rolled-out forbearance programs, part of an effort to avert a massive wave of defaults by borrowers who began losing income when states locked down commerce to slow the virus.