Coronavirus and Stock Markets - Thoughts?

[engineer]

If companies can’t pay back their loans on time, banks have to reflect that in their financials.

JPMorgan:

JPMorgan’s profits in the first quarter nearly evaporated due to a substantial increase in credit-loss provisions — that’s money the bank has to set aside to cover potentially bad loans. That figure jumped from $1.5 billion last year to $8.29 billion last quarter.

The last time JPMorgan had to set aside that amount of money to cover potentially bad loans was the first quarter of 2009 — in the depths of the Great Recession.

JPMorgan 1Q profit drops 70% as it readies for loan defaults

Wells Fargo:

With or without those programs, the unpaid bills are stacking up. Under a new accounting rule, banks must predict losses over the life of a loan and reserve that cash now, which led Wells Fargo to set aside some $3.83 billion in credit loss provisions, up from $845 million a year earlier.

Wells Fargo first-quarter profit decimated as coronavirus boosts provisions

Vulture investors are waiting:

@engineer

“A downturn would not be a bad thing for Apollo,” he said during a panel discussion.

…

“At this point in the cycle, you do have to keep an eye out for potential disruptions and we may already be seeing some of that coming to pass,” said Jason Thomas, global head of research at The Carlyle Group, a $225 billion private equity fund.

Funds could invest in company credit, loans in particular, which tend to decline proportionally to equity in a downturn even though it’s more senior in the capital structure, he said.

@engineer

Some distressed debt specialists told Reuters in January that 2020 could be their year, with default rates tipped to rise and an expected increase in the number of companies that will struggle to service their debt.