The two most profitable banks in the US, JPMorgan Chase & Co. and Wells Fargo & Co., lost US$6.5 billion in combined equity. The loss was due to the increasing interest rates and decreasing bond prices. This threatened the levels of capital across the industry.
In the second quarter, JPMorgan went through a US$3.1 billion fall in accumulated other comprehensive revenue. This was a measure of stockholder equity. Conversely, as reported on yesterday's results released, Wells Fargo announced a US$3.35 billion hit. The equity figure included unrealized security profits. This declined to US$5.1 billion for Wells Fargo as compared with the result by the end of March which was US$11.2 billion.
The bond losses were boosted by rising interest rates. Due to the losses, banks would tend to hoard more gains while they build their capital. This was expected as banks tried to meet the stricter regulatory demand.
"The banks want that in their capital levels," a Sterne Agee & Leach Inc. analyst and former Federal Reserve bank examiner Todd Hagerman, said. "If they lose that they have to raise that much more equity."
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