Bank Profits Collectively Declined by 70% in Q2
According to a report issued by the Federal Deposit Insurance Corporation (FDIC) on Tuesday, in Q2 the nation's lenders collectively experienced a 70% year-over-year drop in net profit to $18.8 billion.
Up until this year, recent banking industry net profits had stayed relatively steady. From Q2 2018 to the final quarter of last year, they tended to hover around the $60 billion mark.
In Q1 and Q2 of 2020, the main reason for the steep fall in profitability is clear: loan-loss provisioning. Banks routinely allocate capital to hedge against potential loan defaults. Before the coronavirus pandemic, that provisioning was comparatively modest, particularly given the long-tail rise of the economy. But once the pandemic hit and businesses started to close, fears of widespread defaults rose dramatically.
Source Fool.com
