BIDEN ECONOMY: Banks Are Preparing for Billions in Losses in 2023

The Biden economy is a disaster and getting worse. More bad news for 2023.

Despite good earnings due to an increase in interest rates, banks are predicting a major increase in defaults in 2023.

Banks reported good earnings results this morning

JP Morgan blew out EPS expectations with $3.57 earnings vs. $3.07 expected per share

Bank of America posted great revenue numbers thanks to higher interest rates

— Genevieve Roch-Decter, CFA (@GRDecter) January 13, 2023

JP Morgan and other banks have set up some major provisions to expected credit losses.

JP Morgan’s $2.3 billion quarterly provision for credit losses is the largest we’ve seen since 2020

In 2019, the provision for the entire year was $5.5 billionhttps://t.co/EV7zGXn5K3

— Genevieve Roch-Decter, CFA (@GRDecter) January 13, 2023

This means that expectations for credit defaults are increasing drastically.

Each quarter, banks increase or decrease their loss provision based on their future expectations of losses from their current credit portfolios.

A large addition in one quarter means that the expectation for credit defaults is higher than it was 3 months earlier.

— Genevieve Roch-Decter, CFA (@GRDecter) January 13, 2023

This all started last year.

This trend of rising default worry started in the middle of last year as rates were rising.

For the first time in 2 years, banks saw that the economic outlook was dimming.https://t.co/MleOinnw1P

— Genevieve Roch-Decter, CFA (@GRDecter) January 13, 2023

Businesses know that according to US GAAP they have to report liabilities as incurred.  These large expected credit losses are predictor of the 2023 economy and another reason the Biden economy may be the worst ever. 

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