Banks can earn millions from PPP loan fees

The loan program is designed to help small American businesses survive the coronavirus recession, and was part of Washington’s $ 2 trillion economic stimulus package.

But the program has come under intense scrutiny in the past few days after the Small Business Administration revealed that the loans have been distributed not only to family businesses, but also to billionaires like Kanye West, major restaurant chains, and lawmakers. from Washington.
S&P’s analysis found that more than 30 community banks could earn as much from small business emergency loans as reported in net income for all of 2019.
JPMorgan Chase (JPM)The United States’ largest bank has issued the most PPP loans of any bank, processing $ 28.8 billion of loans as of June 20, according to S&P. That could generate the bank more than $ 800 million in commissions. Bank of America (BAC) It was the second largest issuer with $ 25.2 billion.

Smaller banks, those with assets of less than $ 250 million, can also receive a significant windfall.

“It could be hugely profitable for us, perhaps the most profitable thing we have ever done,” according to Rick Wayne, president and CEO of Northeast Bank, a community bank with nine branches in Maine that also handles business loans across the country. According to S&P, the bank will raise $ 9.8 million in PPP loan fees.

Rates vary from 1% to 5%, depending on the loan.

While the optics of profiting from the disgrace of the pandemic recession may look bad, advocates of the program say US banks have been a lifeline for businesses during a devastating recession.

The Covid-19 pandemic forced American companies to close and fire millions of workers during the height of the shutdown. As the economy reopens, many businesses still need help to survive the significant decline in income.

Federal Reserve Vice President Randal Quarles called banks “a source of strength during this crisis” in a statement on the results of the Fed stress test two weeks ago.

Unlike the 2007-2009 financial crisis, banks are in better shape to weather the current storm, the Fed said.