(Bloomberg) -- The economic impact of the coronavirus pandemic would completely erase U.S. bank profits for 2020 under a worst-case scenario analysis undertaken by S&P Global Ratings.
The 65 lenders rated by S&P would have an aggregate loss of roughly $15 billion under that scenario, compared with earnings of about $195 billion last year, the ratings company said in a report Tuesday night. S&P’s “severely adverse scenario” forecast the spread of the economic impact to all industries and the harshest decline in consumer spending.
In a less-severe scenario, the impact would be limited to currently affected sectors such as travel and leisure. In that case, 2020 profits would drop by about half to $100 billion, S&P said. The stress scenarios are hypothetical and aren’t the current expected economic outcome, which is still hard to gauge with too many factors unknown, S&P said.
If the economy stuck to the less-severe scenario, S&P would need to take few negative rating actions against banks. Most rating reductions would instead occur in such problematic areas as the energy and consumer industries, the firm predicted. But if the worst-case scenario materialized, there would be a larger number of cuts for the banking sector, S&P said.
The lenders S&P tracks include such giants as JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc., along with smaller companies including Fifth Third Bancorp, State Street Corp. and Comerica Inc., and regional banks.
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