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JPMorgan CEO Jamie Dimon. Photo: J. Lawler Duggan/For The Washington Post via Getty Images

Wells Fargo swung to its first loss since the financial crisis — while JPMorgan Chase and Citigroup reported significantly lower profits from a year earlier — as the banks set aside billions of dollars more in the second quarter for loans that may go bad.

Why it matters: The cumulative $28 billion in loan loss provisions that banks have so far announced they’re reserving serves as a signal they’re preparing for a colossal wave of loan defaults as the economy slogs through a coronavirus-driven downturn.

The big picture: Quarterly results from the big banks are trickling out this week. So far, a trend has emerged: Their earnings are clipped as they buffer credit loss reserves, but those earnings are offset by stock-and-bond trading divisions that are thriving amid feverish market activity.

  • That’s not the case for Wells Fargo, which doesn't have the same exposure to the booming stock market. It reported a loss of $2.4 billion.
  • What they’re saying: “Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter,” Wells Fargo CEO Charlie Scharf said in a press release.

Between the lines: Wells Fargo allocated $9.6 billion for potential loan losses — more than double what it put aside in the first quarter as the economy started to show signs of strain from the coronavirus-imposed lockdowns.

  • JPMorgan set aside another $10 billion, after putting reserving roughly $8 billion in the first quarter.
  • Citi put aside $8 billion, after the $7 billion it allocated in Q1.

By the numbers: At JPMorgan, the country’s biggest bank, profits fell 51% from a year earlier to $4.7 billion — dragged down by what it set aside to cover future loan losses.

  • Profits at Citi fell 73% from a year earlier — to $1.3 billionalso crimped by how much it set aside for loans possibly going bad.
  • JPMorgan’s trading arm saw record revenue, while Citi’s trading division saw revenues rise 55% from a year earlier.

The bottom line: “We still face much un­cer­tainty re­garding the fu­ture path of the econ­omy,” despite some positive economic data and government action, JPMorgan CEO Jamie Dimon said in a press release.

Go deeper

Wells Fargo fires over 100 employees for fraudulently applying for COVID-19 relief funds

Photo: Robert Alexander/Getty Images

Wells Fargo has fired between 100 and 125 employees whom the company believes defrauded the Small Business Administration by applying for and receiving coronavirus relief funds for themselves, according to an internal memo obtained by Axios.

  • More terminations could be on the way, as a source familiar with the situation told Axios an investigation into the matter is ongoing.
Updated 14 mins ago - Politics & Policy

Biden names Erika Moritsugu as senior AAPI liaison

Erika Moritsugu. Photo courtesy: National Partnership for Women & Families

President Biden has named Erika Moritsugu as deputy assistant to the president and Asian American and Pacific Islander senior liaison, the White House announced Wednesday.

Driving the news: The decision follows weeks of pressure from AAPI leaders to include more Asian American representation at the Cabinet level and in senior administration roles.

Matt Gaetz targets CNN in new ad amid sexual misconduct claims

Rep. Matt Gaetz in Doral, Florida, last week. Photo: Joe Raedle/Getty Images

Rep. Matt Gaetz (R-Fla.) announced Wednesday a six-figure ad buy for a spot that takes aim at CNN as part of an offensive to hit back at mounting sexual misconduct allegations, Politico first reported.

Driving the news: Gaetz is under federal investigation following sex trafficking allegations, and the House Ethics Committee has also opened an inquiry. Announcing the 30-second ad, to run in his Florida Panhandle district, Gaetz called on his Twitter followers to "help us fight back!"