Investors have made their verdict on how US banks will be affected by the escalating coronavirus crisis, causing the KBW Bank benchmark to fall 25% in March, more than double the broader market.
Here are five big things we know about the impact of banks and five big unknowns.
What we don’t know
Are dividends in danger? The major American banks have already voluntarily suspended their multi-billion dollar buyout programs. European regulators have now urged their banks to suspend all shareholder payments, including dividends, and US bank investors are wondering if the same could happen in America. “This is a question that arises,” said Mike Mayo, analyst at Wells Fargo, who said stopping the dividends would be a “horrible mistake” because it would send the signal that the banks weren’t strong enough to resist the crisis without taking exceptional measures.
March 15: Coronavirus forces eight major US banks to suspend share buybacks
How long can banks offer forbearance? Banks promise to work with customers on forbearance measures, such as payment holidays, and to make new loans to businesses that need cash. If the coronavirus crisis has been going on for a long time and banks are facing increasing defaults, will banks have to change their approach to protect their own businesses?
March 25: Coronavirus Could Wipe Out US Bank Profits, S&P Says
Will the regulatory landscape change? Banks and their regulators are now on the same side, regulators softening their position on everything from loan loss accounting (for dilatory the introduction of new strict standards) on the size of the liquidity and capital buffers that banks must hold. Will banks be able to keep part of the goodwill of regulators and part of the relief that was granted to them after the end of the crisis?
March 21st: Wells Fargo Calls on Fed to Lift Growth Limit Following Virus Crisis
Can banks give stimulus money to the right people? Politicians have said that banks will play an important role in helping to get paid money for the $ 2 billion stimulus package to businesses and individuals who need it. The mechanics of how it will work is still largely a mystery. Banks have a lot to do to make it go well. Putting money quickly in the hands of those who need it will be a crucial step in stemming the economic crash (and the bank loan losses it causes).
March 24: The Fed relies on community banks to relieve viruses
Will retail banking be the same again? One of the positive spinoffs for banks from the coronavirus crisis is that it forces some customers to finally do their business online, either because their branches are closed, or because the health risks of going out are too high. As the banks have temporarily closed thousands of branches, there is a calm debate over whether all of these branches should reopen in the long term. The crisis is also diverting people from digital money and payments, as digital requires no physical contact at the point of sale. If this trend continues, it could be positive for banks.
March 18: JPMorgan to Close 1,000 Chase Locations Due to Pandemic
What we know
Trading is booming. Analysts and experts believe banks may experience up to 30% increase in trading revenue in the first quarter due to volatility from coronaviruses. On March 11, Mark Mason, chief financial officer of Citigroup, said his bank was heading for a mid-to-single digit increase. [percentage] interval. “Daniel Pinto, head of investment bank JPMorgan, made the same prediction for his bank a month earlier. The flip side is that M&A activity fell off a cliff and that IPOs have dried up, which will hurt investment bank charges.
March 25: Banks enjoy bonanza trade as markets turn
Loan volumes are skyrocketing: Increasing their loan portfolio has long been a struggle for the big American banks. No more. U.S. banks increased their commercial loan books by $ 243 billion last week – twice the amount they add to their loan books in a typical year, according to Federal Reserve data analyzed by the Autonomous research company. Senior executives at major US banks say their loan portfolios are set to increase further in the coming months as they extend credit to businesses and individuals whose income is depleted.
March 27: Citigroup chief says “fallout from navigation virus”
Margins are tightening: Successive emergency cuts in Fed interest rates will benefit banks overall if they manage to stabilize the U.S. economy, but in the short term is bad news as it puts more pressure on already thin lines of credit. Banks are expected to give more details on the impact of this success when JPMorgan Chase launches the first quarter earnings season on April 14.
March 16: US bank stocks crushed by rate cuts and credit fears
Costs increase: Banks spent what they needed to run their businesses during the coronavirus pandemic, but the costs are mounting. Operating a main office and a handful of disaster recovery sites means that some costs are duplicated. Banks bought thousands of screens and other computer equipment to install their employees at home. “We are starting to think about these things,” said a senior executive at a large bank, adding that cost reductions would follow once the dust settles.
March 27: Wall Street flees coronavirus and sees death
Banks play well with staff. Citigroup, Bank of America and Morgan Stanley have all told staff that there will be no layoffs in 2020 due to the coronavirus. Goldman Sachs told staff that he had no plans for layoffs related to the coronavirus, but did not specify a date, a spokesperson for the Financial Times said. Banks also make cash payments to help staff care for children.
March 26: FT bank editors and offers answer your questions about coronavirus and the business world