US banks continue to face severe losses as decline in personal loans is not expected to fully recover until 2023

  • total US personal loans value set to decline by 7.7% in 2020
  • total personal loans market recovery not expected until 2023
  • credit card balances will decline by 3.2% in 2020
  • data from GlobalData’s, latest report:Covid-19 Sector Impact: Retail
    Banking – The US”, August 2020

US banks continue to face severe loses as they experience low net interest margins and falling fee income as reduced consumer spending leads to declines in personal and credit card loans.

According to the latest forecasts from GlobalData, a leading data and analytics company, the total value of US personal loans is set to decline by 7.7% in 2020 from a pre-COVID forecast of 3.7% growth.

Ravi Sharma, Retail Banking Analyst at GlobalData, comments: “The scale of losses for US banks will depend on whether the country can avoid a second wave of cases. GlobalData expects value growth will return to the total US personal loans market in 2021 but at the reduced level of 1.4% from our pre-pandemic forecast of 4.0% and full market recovery is not now expected until after 2023.”

As retail banks liquidity has been stretched, approvals for new personal loans and credit card loans and balances have been tightened. The economic uncertainty of the times and stringent new lending conditions imposed by the banks have made consumers more cautious about taking on additional liabilities. Consequently, despite low credit rates, personal loan applications have fallen.

Sharma adds: “While the pandemic will lead to a rise in credit card transactions as cash usage declines, growth will be hampered by reduced consumer spending. GlobalData predicts that credit card balances will decline by 3.2% in 2020, well below our previously estimated growth of 5.5%.”

Information based on GlobalData’s latest eport:Covid-19 Sector Impact: Retail
Banking – The US”, August 2020

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