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US banks foresee a standstill due to Coronavirus recession

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Investors are eager to know how the coronavirus pandemic will affect the financial stability of economies worldwide. U.S. banks JP Morgan Chase & Co and Wells Fargo & Co are bracing for tougher times, Reuters said.

This is an uncertain time. Nations far and wide are experiencing an economic downfall due to the coronavirus outbreak. The pandemic has forced governments to impose prolonged restrictions in an effort to contain its severity and prevent worse complications to economic stature.

The coronavirus recession behaves inimically to previous outlooks of monetary and trade organizations.  The International Monetary Fund (IMF), in particular, says that the ongoing recession is not just “a phase” but is going to be a prolonged predicament that will unleash a crisis comparable to the 1930 Great Depression.

A gloomy economic outlook

According to the IMF, the global economy will contract by 3% this year for both advanced and developing countries as they face hindrances to operate and make profits in their major industries.

The Fund adds how this will be a most trying time for banks as contingency approaches in response to pandemics have not been formally laid out and discussed in the past. This means that the future sustainability of these banks will depend on its ability to control the crisis.

A big plunge in major profits, shares, and GDP

Reportedly, these two banking giants are experiencing major profit declines despite mechanisms already in place. It seems that both are unable to overcome the impacts of the coronavirus recession and are already preparing to experience future losses – particularly in loans.

On Wednesday afternoon, Wells Fargo experienced a 4.3% decrease in its shares, while JPMorgan reported a 3.4% fall. Similarly, other banks in the U.S. have reported a significant fall in their shares as well.

Banks portray recession as “a crisis like no other”

Wells Fargo Chief Financial Officer John Shrewsberry foresees sustained unemployment and insignificant growth in the country through 2021. Analysts respond that this correlates to how companies and industries are unable to fully operationalize. With hampered BAUs, organizational sustainability is at stake.

Meanwhile, JPMorgan economists inform that in mid-2020, a 40% decline in GDP could take place, leading to an impaling 20% unemployment spike. This leads some to think that the coronavirus recession might be more deadly than the disease as unemployment could mean empty wallets for salaried wage-earners.  

As the pandemic clearly shakes up the once-immovable banking giants, investors are taking imminent steps to prevent losses and preserve funds. 

 

Image courtesy of CNBC/Youtube Screenshot.

Ava Alonzo

Ava Alonzo is a contributor to Micky News. She is completing her post-graduate degree in Management. Ava enjoys writing about anything related to business, technology, science and entertainment. In her spare time, she enjoys watching action-filled films or skimming through the pages of books written by Paulo Coelho.

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