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COVID-19

Quarterly bank earnings may tell a bigger story about the U.S. economy right now

Mitchell Hartman Jul 13, 2020
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Chris Hondros/Getty Images
COVID-19

Quarterly bank earnings may tell a bigger story about the U.S. economy right now

Mitchell Hartman Jul 13, 2020
Heard on:
Chris Hondros/Getty Images
HTML EMBED:
COPY

The earnings season is about to begin for corporations to report their profits, losses, write-offs and all the rest for the quarter that ended in June.

This week we get a slew of earnings reports from big banks, starting with JPMorgan Chase, Citigroup and Wells Fargo on Tuesday and followed by Goldman Sachs and Bank of America later in the week.

Why should we care about the balance sheets of America’s biggest banks?

“Bank earnings tell you the most about the nation’s economy as a whole,” said Karen Petrou at Federal Financial Analytics. “Because banks trade with, lend to, take money from every segment: consumer, retail and corporate.”

Petrou said banks are putting aside more capital to cover losses on business and real estate loans, as well as credit card and car loans. Banks are also earning less from lending because interest rates are so low.

But Ken Leon at CFRA Research said the biggest banks are also able to make money from parts of the economy that are thriving: “the capital markets, equity and debt underwriting, and asset or wealth management.”

Leon said smaller regional and community banks are more exposed than big banks to the risk of consumers and businesses defaulting on their loans as the pandemic continues.

COVID-19 Economy FAQs

What’s the outlook for vaccine supply?

Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.

How has the pandemic changed scientific research?

Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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