Economic decline is threatening US banks


American banks expected the economy to deteriorate, despite achieving strong results at the end of 2022 as a result of a push from rising prices and market volatility, while banks allocated more funds to deal with potential defaults.

JP Morgan Chase bank, considered that the most likely scenario is the occurrence of a moderate recession starting from the last quarter, while Citigroup and Bank of America indicated the possibility of a deterioration in the economic prospects, and the expectation of Wells Fargo Bank says the economic environment is less favorable.

In preparation for the possibility that their customers wouldn’t be able to pay their debts, banks increased their reserves by $1.4 billion in JPMorgan Chase Bank, $640 million in Citigroup, $403 million in Bank of America, and $397 million in Wells Fargo Bank.

Meanwhile, banks continued to make profits, albeit at times less than achieved in 2021.

Which led to an increase in net profits in the last quarter by 6% to $11 billion in JP Morgan Chase and by 2% to $ 6.9 billion in Bank of America.

However, it fell 21% to $2.5 billion in Citigroup and 50% to $2.9 billion in Wells Fargo.

For his part, the CEO of JPMorgan Bank, Jamie Dimon, said: The US economy is still strong now, with consumers continuing to spend their money and in light of a good situation for companies”.

Dimon stressed that the negative effects of the Covid-19 pandemic continue to fade, stressing at the same time that there are still many doubts about the final effects of geopolitical tensions such as the Russian war in Ukraine, the fragility of energy and food markets, inflation, and the raising of the main interest rates initiated by the US Federal Reserve.

Dimon said that the bank will remain vigilant and prepared for all possibilities.

On the other hand, US Treasury Secretary Janet Yellen warned earlier that Washington may have to take extraordinary measures early this week to avoid defaulting on the debt, which increased tension between Republicans and Democrats over this controversial issue.

Yellen said: It is likely that the United States will reach the maximum debt limit legally permitted at $31.4 trillion on January 19th, which will force the Treasury Department to implement exceptional liquidity management measures that can prevent debt default until early next July.

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