As economic conditions have worsened, U.S. Bancorp put aside another $1.7 billion to cover loan defaults, another sign that the nation’s biggest banks expect to see significant economic shocks in the months ahead due to the coronavirus pandemic.
The nation’s fifth-largest bank’s increase in its provision for credit losses in the second quarter comes on top of nearly $1 billion it set aside last quarter for the same reason as the pandemic was just getting started.
Earlier this week, three of the nation’s biggest banks — JPMorgan Chase, Citigroup and Wells Fargo — said they had stockpiled nearly $30 billion as they also prepared for more economic hardship to come.
For U.S. Bancorp, the move took a significant toll on its bottom line in the quarter, with its profit falling 62% to $689 million, compared with $1.8 billion in the same quarter a year ago.
“Our second-quarter earnings results were reflective of a more challenging economic environment than we have seen in some time,” Andy Cecere, the company’s CEO, said in a statement. “However, our diversified business mix generated healthy fee revenue growth, expenses were essentially flat, and capital and liquidity positions ended the quarter in a strong position.”
The company’s revenue of $5.8 billion was essentially flat in the quarter. Its noninterest income rose 5%, driven primarily by growth in commercial products such as fees related to issuing corporate bonds as well as higher mortgage banking revenue due to refinancing activities.
Its net interest income, however, fell 3.2%, mostly due to lower interest rates even though its loan volume increased.
U.S. Bank noted that it has loaned $7.3 billion to more than 101,000 customers through the Paycheck Protectiion Program. About 87% of those loans were for less than $100,000.