The biggest U.S.-based banks will be reporting their revenues and earnings for the second quarter next week, with great attention directed to the additional loan loss provisions they make. In the first quarter the “Big Six” set aside only about $30 billion in new loan loss reserves; but that reflected really only a part of one month of economic collapse, mainly in the oil sector. Since then, as one Bloomberg News story on July 12 reported of the pace of bankruptcies of U.S.-based companies, there have been 110 such bankruptcies. Moreover, 35 of those firms had listed assets of $1 billion or more, 8 of them with assets of $6 billion or greater when they failed.
If the major banks lose the same portion of their assets they did in 2008, those losses will be in the range of $400 billion; yet, their loan-loss reserves have been increased only by that $30 billion going into the coming week’s reports.
