Because of Corona ... US banks' profits are down 70%, and uncertainty surrounding the economy's recovery

Data on Tuesday showed that US banks' profits tumbled nearly 70% to $ 18.5 billion in the first quarter of 2020, compared to the same period last year, with banks affected by the economic repercussions of the Corona virus pandemic.

The Deposit Insurance Corporation said that the "deterioration of economic activity" had caused banks to write off bad debts and allocate billions of dollars to cover future losses.

More than half of the US banks reported a decline in profits, while 7.3% of banks reported no profits.

The new report - the first government survey of the banking sector since the beginning of the pandemic - shows that banks set aside $ 38.8 billion to cover potential loan losses in the future, an increase of about 280% from the first quarter of the previous year.

With many investors taking profit-taking sales in the stock market, US banks saw a jump of $ 1.2 trillion (or 8.5%) in deposits during the first quarter compared to the previous three months.

Warning

These negative results came at a time when US Federal Reserve Chairman Jerome Powell on Tuesday warned of the continued great uncertainty surrounding the extent and pace of the American economy recovering from the repercussions of the emerging Corona Virus pandemic, indicating that the main interest rate in the United States will remain Close to 0% until the clouds of the economy fade.

Powell said in a pre-written speech before the Senate Banking Committee of the banks that "the levels of economic output and employment are still much lower than before the pandemic, and the great uncertainty still surrounds the timing and strength of recovery."

"It is unlikely that a full recovery of the economy will happen before people are restored to contain the disease," Powell added.

He warned that low-income groups, as well as African Americans, Hispanics and women, are the hardest hit by the economic downturn, increasing the risk of divisions in society.

Powell also warned of the risks to the recovery of small companies that represent a large part of the labor market in the United States.

The testimony of the President of the Federal Reserve came at a time when Congress is discussing the additional stimulus package for the American economy, after about three trillion had already been allocated to stimulate the economy since the outbreak of the emerging Corona virus.