U.S. Bancorp has put aside another $1.7 billion to cover potential loan defaults, one more 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 to its provision for credit losses in the second quarter comes on top of nearly $1 billion it set aside last quarter for the same purpose 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 also stockpiled nearly $30 billion for loan losses as they also prepared for more economic hardship to come.
Terry Dolan, U.S. Bancorp's chief financial officer, said unemployment levels have been higher than expected compared to initial projections back in March.
The bank now expects unemployment to remain at more elevated levels over a longer period of time, declining to 9% by the fourth quarter of this year and 7.8% by the end of 2021.
"Anytime you have unemployment at the level that it is, the ability for consumers to make their payments gets challenging," he said.
He added that the bank doesn't anticipate any future increases to its reserve fund, but there are still a lot of unknowns.
"At this point in the business cycle, especially when you are dealing with COVID and you don't know all of the different challenges in front of you, it's kind of like climbing a mountain in the fog," he said.
