Monday, June 8, 2020

US Lenders See Hopeful Signs in Loan Repayments

This is a very strong indication that the economy will have a strong rebound as the lockdown eases.

US banks expect a significant number of borrowers to recommit to normal payment schedules once their forbearance deals expire later this month, senior executives said, adding that many clients had not been as hard hit by the pandemic as they feared, reports the Financial Times.

Between 4 per cent and 22 per cent of borrowers across various types of loans signed up for 90-day payment holidays designed to give households and businesses breathing room as the coronavirus pandemic threatened their livelihoods, according to analysis by Autonomous.

Having set aside tens of billions for loan losses in the first quarter, banks have spent recent weeks studying the income patterns of those who opted in to the payment holidays. They have also begun contacting customers who were granted forbearance measures, asking them if they planned to extend for another 90 days, according to the Times.

The fact that the numbers applying for forbearance were far lower than that one of America’s biggest banks originally modeled made a senior executive “more optimistic” than when first-quarter earnings were reported in April, though they cautioned that it was too early to predict how loan losses would ultimately evolve, the paper said.

Credit cards could have even bigger fall-offs, according to the Times. Synchrony Financial recently said 75 per cent of its customers who initially took payment holidays had already been able to return to “current” status and resume payment. Amex said it was likely to close its forbearance program because demand had slowed so much.

Folks, there is plenty of money out, pumped in by the Fed that is reaching every corner of the economy. As the lockdown eases, there is going to be massive bidding up of prices.


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