Loan-loss provisions

The Dallas bank set aside less in the second quarter for credit losses than analysts expected. Executives cited action in Texas and California to reverse reopenings and said they're still committed to the oil and gas business.

The Birmingham, Ala., company more than doubled its loan-loss provision from three months earlier and its chief financial officer said that more than half of its loans to oil and gas companies could eventually become criticized.

The company said it recorded a large loan-loss provision in the second quarter to reflect Coex Coffee International's pending liquidation.

Second-quarter earnings fell by more than 50% from the same period last year after the company allocated $5.1 billion for potential loan losses.

The Pittsburgh bank says fewer borrowers are asking for help and that many borrowers who received assistance are making payments again. But with the coronavirus pandemic still raging in much of the country, CEO William Demchak and other bankers are tempering their optimism.

The energy sector, retail and hospitality are among the industries that are faring poorly during the pandemic. The bank expects loan losses to remain elevated well into 2021.

Megabanks like JPMorgan Chase boosted loan-loss provisions to record levels in the second quarter in preparation for what could be a wave of loan defaults.

The firm set aside a record $9.5 billion for credit losses, about $4 billion more than analysts had expected, as it braces for a wave of coronavirus-related defaults.

Bankers had asserted in April that they could handle a slump in oil prices tied to the coronavirus pandemic. Continued volatility, combined with declining collateral values and a rise in bankruptcies for exploration companies, is denting their confidence.

While elevated loan-loss provisions are expected to eat into all banks’ earnings, midsize banks could suffer more than their big-bank rivals because they have fewer revenue drivers. Meanwhile, investors will be watching closely for any signs of dividend cuts stemming from the Federal Reserve’s caps on payouts.

Deferral periods on scores of commercial loans will soon be ending, and many banks’ profits this year could turn on whether borrowers can resume making payments or will seek extensions.

In one of the first comprehensive analyses of how the banking industry was affected by the onset of the coronavirus pandemic, the agency said quarterly income fell by nearly 70% from a year earlier.

Lawmakers should go further than their recent criticism of the Financial Accounting Standards Board's loan-loss rule and just hand over its duties to the Securities and Exchange Commission.

Lenders are cautioning not only that second-quarter provisions might exceed the spike seen earlier this year, but also that credit costs could be elevated into 2021 if the economic slowdown drags on or fears of a second coronavirus wave are borne out.

Lenders stock up on masks, Plexiglas barriers and cleaning supplies; lawmakers hope recent fixes will attract more borrowers, but small businesses remain wary after constant changes.

The closure of IBEW Local Union 712 Federal Credit Union marks the first CU to shut its doors in the wake of the coronavirus.

The latest Credit Union Trends Report from CUNA Mutual Group predicts interest rates will be at record lows for at least two years and earnings are also likely to take a hit from record-high unemployment.

The economic contraction caused by the coronavirus pandemic has been worse than the Wall Street firm had modeled two months ago, its president John Waldron said Wednesday.

The Toronto company also said it set aside 232 million this year for U.S. regulatory probes into the bank’s metals-trading practices and costs tied to the wind-down of that business.

The second-quarter jump in provisions may be three to four times higher than a year earlier and will be mostly for loans that have yet to go bad, analysts said.