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JPMorgan just revealed it thinks a lot of people won’t pay their credit card bills

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JPMorgan just revealed it thinks a lot of people won’t pay their credit card bills

  • JPMorgan is building its credit reserves in anticipation that people might not be able to pay their credit card bills.
  • The bank’s first quarter earnings statement showed its credit reserves increased by $6.8 billion from the prior year, 56% of which was allocated for its consumer card division. 
  • “Given the likelihood of a fairly severe recession, it was necessary to build credit reserves of $6.8B, resulting in total credit costs of $8.3B for the quarter,” CEO Jamie Dimon said in the earnings release.

https://www.cnbc.com/2020/04/14/jpmorgan-just-revealed-it-thinks-a-lot-of-people-wont-pay-their-cred...

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Re: JPMorgan just revealed it thinks a lot of people won’t pay their credit card bills

Add Bank of America, Goldman Sachs, Citigroup, and Wells Fargo to the list.

 

"On Tuesday, JPMorgan, America’s largest bank by assets, booked a $6.8 billion credit reserve to prepare for loan defaults, which wiped out most of its first quarter earnings. Add to that credit reserves set aside by Bank of America, Citigroup, and Wells Fargo, and the total amounts to roughly $20 billion. JPMorgan chief financial officer Jennifer Piepszak said on a call with reporters this week that provisions could be “meaningfully higher in the next quarter.”

 

Via Forbes: Exclusive: Early Data Shows 12% Of Online Loans In Trouble, Double Just Weeks Ago 

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Re: JPMorgan just revealed it thinks a lot of people won’t pay their credit card bills


@CassieCard wrote:

Add Bank of America, Goldman Sachs, Citigroup, and Wells Fargo to the list.

 

"On Tuesday, JPMorgan, America’s largest bank by assets, booked a $6.8 billion credit reserve to prepare for loan defaults, which wiped out most of its first quarter earnings. Add to that credit reserves set aside by Bank of America, Citigroup, and Wells Fargo, and the total amounts to roughly $20 billion. JPMorgan chief financial officer Jennifer Piepszak said on a call with reporters this week that provisions could be “meaningfully higher in the next quarter.”

 

Via Forbes: Exclusive: Early Data Shows 12% Of Online Loans In Trouble, Double Just Weeks Ago 


I found it interesting that Discover and Capital One, both known for dealing with clients that have average and below average credit, had no meaningful upticks in delinquency.







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Re: JPMorgan just revealed it thinks a lot of people won’t pay their credit card bills


@Brian_Earl_Spilner wrote:

@CassieCard wrote:

Add Bank of America, Goldman Sachs, Citigroup, and Wells Fargo to the list.

 

"On Tuesday, JPMorgan, America’s largest bank by assets, booked a $6.8 billion credit reserve to prepare for loan defaults, which wiped out most of its first quarter earnings. Add to that credit reserves set aside by Bank of America, Citigroup, and Wells Fargo, and the total amounts to roughly $20 billion. JPMorgan chief financial officer Jennifer Piepszak said on a call with reporters this week that provisions could be “meaningfully higher in the next quarter.”

 

Via Forbes: Exclusive: Early Data Shows 12% Of Online Loans In Trouble, Double Just Weeks Ago 


I found it interesting that Discover and Capital One, both known for dealing with clients that have average and below average credit, had no meaningful upticks in delinquency.


And it's certainly possible this trend will continue. It's a plausible prediction that those with historically higher incomes will be hurt the most (at least short term) when it comes to unemployment/underemployment. With the current $600/wk enhancement to UE benefits, those on the lower income scales are conceivably making more money on unemployment than they did when employed. It's the high income earners that are hurting now that they've turned to unemployment benefits. 

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Message 4 of 13
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Re: JPMorgan just revealed it thinks a lot of people won’t pay their credit card bills


@CreditSweeper wrote:


With the current $600/wk enhancement to UE benefits, those on the lower income scales are conceivably making more money on unemployment than they did when employed. It's the high income earners that are hurting now that they've turned to unemployment benefits. 


“The average person on unemployment in the U.S. should be making the equivalent of a $55,000 annual salary for eight weeks,” says Giuliano Bologna, an analyst at investment bank BTIG.

 

My dad always told me that it's not how much you make, it's how much you save. When I worked as a programmer in the financial sector, I came across so many people who did not understand any of that. They weren't even making that much either. $100-125K a year in Boston, when you live in town, really isn't as great as many of those same people think it is.

 

I'm sure many of them are underwater right now.

 

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Re: JPMorgan just revealed it thinks a lot of people won’t pay their credit card bills


@CassieCard wrote:

@CreditSweeper wrote:


With the current $600/wk enhancement to UE benefits, those on the lower income scales are conceivably making more money on unemployment than they did when employed. It's the high income earners that are hurting now that they've turned to unemployment benefits. 


“The average person on unemployment in the U.S. should be making the equivalent of a $55,000 annual salary for eight weeks,” says Giuliano Bologna, an analyst at investment bank BTIG.

 

My dad always told me that it's not how much you make, it's how much you save. When I worked as a programmer in the financial sector, I came across so many people who did not understand any of that. They weren't even making that much either. $100-125K a year in Boston, when you live in town, really isn't as great as many of those same people think it is.

 

I'm sure many of them are underwater right now.

 


Which is basically why I packed up my crap and moved.  Literally an extra $600/week in free cash flow being out of California.  That's not going to additional discretionary spending at least once the major appliance purchases are done, and even then just on the tax differential alone is still an ROI of under 10 weeks.

 

It's also part of the reason to just dump the LA condo, get financially tight and that's what, 1818+470+400 plus some utilities even when not around and sounds kinda like another $700/week and it makes little sense to rent it out and as such other than shuffling like 1300 to an admittedly mostly appreciating asset doesn't seem like fantastic financial return.  To be fair none of my jobs are going anywhere soon, big giant employer still (sigh) going through the paperwork to marry me, other is still rocking a much better bill rate, and actually picked up another 10 hr/wk retainer which wouldn't surprise me will go for as long as I want it... and hell it pays for the Houston mortgage and HOA. 

 

All adds up when doing well top line and then some optimizations as to where your money goes before landing at the bottom line, but keep on financial squirreling.

 




        
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Re: JPMorgan just revealed it thinks a lot of people won’t pay their credit card bills


@Brian_Earl_Spilner wrote:

@CassieCard wrote:

Add Bank of America, Goldman Sachs, Citigroup, and Wells Fargo to the list.

 

"On Tuesday, JPMorgan, America’s largest bank by assets, booked a $6.8 billion credit reserve to prepare for loan defaults, which wiped out most of its first quarter earnings. Add to that credit reserves set aside by Bank of America, Citigroup, and Wells Fargo, and the total amounts to roughly $20 billion. JPMorgan chief financial officer Jennifer Piepszak said on a call with reporters this week that provisions could be “meaningfully higher in the next quarter.”

 

Via Forbes: Exclusive: Early Data Shows 12% Of Online Loans In Trouble, Double Just Weeks Ago 


I found it interesting that Discover and Capital One, both known for dealing with clients that have average and below average credit, had no meaningful upticks in delinquency.


Think there's been slow/no pay period extensions for pretty much every lender for anyone that can conceivably claim hardship... and really other than Chase which sees ~95% of my cash flow currently, how would any of those lenders even be able to check if I simply told them I'd been furloughed?  By default nobody is deliquent yet, I think the big question is what happens when those offers run out.

 

Also I sort of look at the overall issue: Chase built up their reserves out of free cash flow from Cassie's post, everything is going to lag including dividend payments which is probably why they fell.

 

I am glad I have been unwinding my Lending Club investments over the last few years, this would've probably obliterated the rest from the fall that started in 2017 with the uptick in deep subprime defaults.




        
Message 7 of 13
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Re: JPMorgan just revealed it thinks a lot of people won’t pay their credit card bills


@Revelate wrote:

@CassieCard wrote:

@CreditSweeper wrote:


With the current $600/wk enhancement to UE benefits, those on the lower income scales are conceivably making more money on unemployment than they did when employed. It's the high income earners that are hurting now that they've turned to unemployment benefits. 


“The average person on unemployment in the U.S. should be making the equivalent of a $55,000 annual salary for eight weeks,” says Giuliano Bologna, an analyst at investment bank BTIG.

 

My dad always told me that it's not how much you make, it's how much you save. When I worked as a programmer in the financial sector, I came across so many people who did not understand any of that. They weren't even making that much either. $100-125K a year in Boston, when you live in town, really isn't as great as many of those same people think it is.

 

I'm sure many of them are underwater right now.

 


Which is basically why I packed up my crap and moved.  Literally an extra $600/week in free cash flow being out of California.  That's not going to additional discretionary spending at least once the major appliance purchases are done, and even then just on the tax differential alone is still an ROI of under 10 weeks.

 

It's also part of the reason to just dump the LA condo, get financially tight and that's what, 1818+470+400 plus some utilities even when not around and sounds kinda like another $700/week and it makes little sense to rent it out and as such other than shuffling like 1300 to an admittedly mostly appreciating asset doesn't seem like fantastic financial return.  To be fair none of my jobs are going anywhere soon, big giant employer still (sigh) going through the paperwork to marry me, other is still rocking a much better bill rate, and actually picked up another 10 hr/wk retainer which wouldn't surprise me will go for as long as I want it... and hell it pays for the Houston mortgage and HOA. 

 

All adds up when doing well top line and then some optimizations as to where your money goes before landing at the bottom line, but keep on financial squirreling.

 


High CoL areas don't have to be high CoL areas if certain sacrifices are willing to be made. I'll use Boston since it was brought up and that's where I live, but part of the problem is people want to live like they think they deserve, not what they actually can afford. I do know tech bros who make low 6-figures and have nothing left at the end of the month because they refuse to have roommates, or want a second bathroom, or just have to own a German automobile despite being able to walk/train to work. They think living in 500 square feet is beneath a person of their means, so they pay $4,000+ rent and complain they have nothing left to save each month. When they do eventually flee the city, they flee to McMansions with thrice the utility bills because, again, they refuse to be someone who makes six-figures yet lives in a modest home with a modest lifestyle. There's people here making half what they are and still getting by, but it seems many are loathe to live that way.

 

I'm doing Boston on under $1,500 monthly all-in on rent/mortgage/utilities. It is possible to do. I definitely agree it's not how much you make, it's how much you save.

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Re: JPMorgan just revealed it thinks a lot of people won’t pay their credit card bills


@iced wrote:

I do know tech bros who make low 6-figures and have nothing left at the end of the month because they refuse to have roommates, or want a second bathroom, or just have to own a German automobile despite being able to walk/train to work. They think living in 500 square feet is beneath a person of their means, so they pay $4,000+ rent and complain they have nothing left to save each month.

!@#%^*& brogrammers. lol Yep...exactly the type that I worked around. One even bought a sailboat to be out on the Charles on 4th of July. He said that was his 'beemer', and bought a new Civic for a car.

 

I was working with COBOL/JCL/TSO/ISPF/CICS and a bunch of other acronyms brogrammers are afraid of, and I always let them believe they made more than me. They didn't think of trying to borrow money from me.

 

And Boston on $1500, all-in? You're a pro! I lived in Brookline, without a car, and always took the C line to South Station for work. I can't even imagine $1500. haha

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Re: JPMorgan just revealed it thinks a lot of people won’t pay their credit card bills


@CassieCard wrote:

@iced wrote:

I do know tech bros who make low 6-figures and have nothing left at the end of the month because they refuse to have roommates, or want a second bathroom, or just have to own a German automobile despite being able to walk/train to work. They think living in 500 square feet is beneath a person of their means, so they pay $4,000+ rent and complain they have nothing left to save each month.

!@#%^*& brogrammers. lol Yep...exactly the type that I worked around. One even bought a sailboat to be out on the Charles on 4th of July. He said that was his 'beemer', and bought a new Civic for a car.

 

I was working with COBOL/JCL/TSO/ISPF/CICS and a bunch of other acronyms brogrammers are afraid of, and I always let them believe they made more than me. They didn't think of trying to borrow money from me.

 

And Boston on $1500, all-in? You're a pro! I lived in Brookline, without a car, and always took the C line to South Station for work. I can't even imagine $1500. haha


You can't be that old, and if you picked that specifically I'm even more impressed than I was already.  That was fading when I got into the industry at Dell, and as more and more people up and retired demand for those skillsets have just kept increasing.  I have been working outside of big enterprise for a while, and now I'm going to have to be part of a mainframe migration, not to something cheaper or more modern, but to a new datacenter.  They still exist, people that can maintain and improve code on those languages almost assuredly have higher bill rates than I do.  Hell, probably double even and I'm not talking what I make, I mean what the big giant company sells my time for on some projects.

 

And iced, yeah in term of LA being another HCoL, same reason I only took something like 1/3 of what I was approved for on a mortgage application and really my only mistake there was doing a 15 year mortgage even if I could afford it without breaking a sweat.  There's a good chance right now that I literally have an additional 300K or so because of that decision from 5 years ago, probably more actually and that's with my navel gazing for a period time... if I was trying to make that marker, that wouldn't be possible I'd be desperate for work.

 

Doesn't sound like fun.  

 

Flipside current income which I know can't last, just did a frontend DTI calc for giggles on the Houston place: single digits.  Good times, and it's ideal for me and feels downright spacious compared to my LA condo even if it's only 100 sqft larger or so, but even if I get whacked to the point I'm only making 1/3 of what I am right now, it's still easily affordable.  At some level there's just more comfort in being able to write a check for the debt in one's life if required.

 




        
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