First-quarter earnings reports from the four largest U.S. banks marked a turning point in the credit cycle, as multi-billion dollar reserve builds met market expectations and led to EPS declines of year-over-year going 43% for Bank of America Corp. to a near wipeout for Wells Fargo & Co.

It was usually too early for the shockwave of the coronavirus to show distinctly in write-offs or delinquent loans, though the distress was evident in the payment deferrals that banks granted to large numbers of borrowers. BofA said it accepted deferrals for 3% of its consumer and small business accounts, covering 7% of balances. JPMorgan Chase & Co. said 4% of its consumer “service book” had requested forbearance.

The big question remains whether massive provisions will continue in future periods. JPMorgan Chase pointed to the possibility they could, noting that its economists’ projection for peak unemployment in the second quarter had nearly doubled to 20% since the bank “closed the books” in the first quarter.

BofA said its total reserves now equated to around 65% of estimated credit losses over the nine-quarter period projected in the very adverse 2019 supervisory stress test scenario. Chief Financial Officer Paul Donofrio said the allocation of BofA could “rise or fall,” largely depending on how quickly economic activity picks up. Citigroup Inc. Chief Financial Officer Mark Mason said it was “far too early” to provide guidance on second-quarter supply.

At Wells Fargo, the first quarter provision of $4.01 billion was 3.4 times the bank’s average quarterly provision in 2019. At JPMorgan Chase, BofA and Citi, first quarter provisions of $4.76 billion $8.29 billion was 5.3 to 6.1 times the quarterly averages in 2019. These three banks saw significant builds for their huge credit card portfolios, where reserves now range from 8, 3% sales at BofA to 9.7% at JPMorgan Chase.

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Net interest income, which had been the driving force behind bank profits before the start of the credit cycle, also fell year-on-year as the Federal Reserve cut its benchmark interest rate. to near zero and long-term rates have fallen along with dismal inflation expectations and growth prospects.

JPMorgan Chase forecast it would generate about $55.5 billion in net interest income in 2020, down from its projection of $57 billion on Feb. 25, due to the changing environment. rates. BofA forecast its net interest income to rise from $12.13 billion in the first quarter to around $11 billion in the second quarter, and stabilize from there.

Forecasts of lower net interest income came despite an increase in loans and assets, and underscored the pressure on net interest margins. JPMorgan Chase topped $3 trillion in assets for the first time, as its balance sheet grew nearly 17% from the fourth quarter to the first quarter.

Part of the balance sheet growth was driven by massive amounts of corporate borrowing on lines of credit as large corporations sought to build defensive cash positions. Major banks said those drawdowns eased in April, but amounts borrowed could go unpaid for some time as businesses navigate the pandemic. Since line draws were concentrated in March, they should help drive increases in average earning assets in the first through second quarters.

Additionally, the big banks are set to add billions of dollars in small business loans in the second quarter through their participation in the federal government’s emergency paycheck protection program. JPMorgan Chase said it was working on $37 billion in loans under the program as of the morning of April 14, including $9.3 billion it had already funded. That compares to the $50 billion in draws on commercial lines of credit reported by the bank. BofA said it had processed applications for $43 billion in PPP loans as of April 8, compared with $67 billion in net commercial borrowing in the first quarter.

PPP loans carry an interest rate of 1%, but incur processing fees of up to 5% of the loan amount, and much of the principal is likely to be repaid quickly as the government converts the money used to payroll and other subsidy expenditures.

Wells Fargo’s net interest margin rose two basis points from the fourth quarter of 2019 to 2.57% in the first quarter of 2020, but Chief Financial Officer John Shrewsberry said the bank expects a decline in net interest income when asked how the second quarter would go. compare with the first trimester.

BofA’s net interest margin fell four basis points to 2.32%, although analysts at Keefe Bruyette & Woods said in an April 15 note that the bank’s net interest income exceeded their expectations.

Still, “investors looked at the potential transitory nature of balance sheet growth and focused on credit,” KBW analysts said. “We expect interest rates to remain low, so we don’t expect significant operating leverage in the near term.”