Monthly Archives: July 2016

Banks’ Bet on Consumers is Getting Riskier

Lenders are girding for an increase in loan losses as they cast a wider net for borrowers

Banks are seeing growth in customers’ credit-card balances and are preparing for more to default. PHOTO: ABEL URIBE/TRIBUNE NEWS SERVICE/ZUMA PRESS

By AnnaMariaAndriotis
July 22, 2016 5:12 p.m. ET

Big banks are socking away more money to cover possible losses on consumer loans, as their executives warn the long boom in credit quality has peaked.

Lenders including J.P. Morgan Chase & Co.,Wells Fargo & Co., Capital One Financial Corp. and Discover Financial Services said on earnings calls this month that they have bolstered their reserves—in some cases for the first time in years—to prepare for an uptick in loan losses.

The higher reserves in part reflect efforts to expand loan volume. As competition for borrowers intensifies, some lenders also are lowering credit-score requirements and taking on riskier customers.

But they also stem from a growing conviction that improvements in credit quality have come to an end.

Read the full article here.