US banks execs see less-than-expected need for ongoing loan deferrals - Business Insider

the Financial Times. They also noted that many clients weren't hit as hard by the pandemic as they feared.At Citizens Bank, for example, only 10% of direct deposit customers who took advantage of payment holidays have dealt with income disruption since the pandemic began. And a senior executive at a major US bank cited by the FT said that the bank's research suggested the number of borrowers in forbearance will drop 20% after the initial payment deferral period expires.

. Banks have set aside of dollars to prepare for losses due to the economic fallout from the coronavirus, but if they get customers back on track with loan payments sooner rather than later, it will blunt the hit that banks' revenues take. And this potential benefit would be compounded by the fact that some banks are seeing customers who were granted forbearance making regular payments anyway: Bank of America, Wells Fargo, and US Bank, for example, have publicly stated that between 25% and 40% of those granted forbearance are doing so.

And a lower need for forbearance measures and payment holidays will decrease banks' competitive drive to offer them. Major US banks have deployed a wide range of to help alleviate financial pressure on clients during the coronavirus pandemic, and payment holidays — such as mortgage forbearance and credit card payment deferments — have been some of the most popular.

Because of their popularity, declining to offer such relief options to customers at the onset of the coronavirus crisis would have put a bank at a serious competitive disadvantage. But as clients demonstrate a reduced need, deferment options will become less of a table-stakes offering, and we are likely to see banks stop advertising them broadly to all customers and move to a case-by-case strategy to nudge clients in the direction of normal repayment status.

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