More interest, more bankruptcies – banks are preparing for difficult times

New York, Frankfurt For months, the mix of energy crisis, high inflation, impending recession and fears of war left the balance sheets of European banks almost untouched. Now the major American banks have prepared themselves more clearly than before for an economic slump, sending a warning signal to Europe.

Because the provisions for possibly bursting loans made a significant contribution to the fact that the net profits of large US institutions plummeted in the third quarter: JP Morgan earned 17 percent less net, the minus was even greater at Citi with 25 percent, Morgan Stanley with 29 percent and Wells Fargo at 31 percent.

The industry is benefiting from rising interest rates, especially in the USA. In return, many income from investment banking collapsed. And the tighter monetary policy, which enables higher interest income, is also causing problems. The US Federal Reserve (Fed) is raising interest rates faster than it has in a long time to fight inflation.

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