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Citigroup Inc. announced quarterly results Tuesday.

Keith Bedford/Reuters

Citigroup Inc on Tuesday posted a 73% plunge in quarterly profit, as the bank set aside nearly $8 billion to brace itself for a potential surge in loan defaults stemming from the COVID-19 pandemic.

The largest U.S. banks have so far stashed away more than $52 billion to prepare for possible losses this year as the economy heads into one of its worst recessions in decades.

Shares of the lender were down about 2% in morning trade.

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Citi was forced to build reserves of $5.6 billion during the quarter, which also saw rival JPMorgan set aside record loan loss provisions to weather the fallout of a pandemic that has driven up unemployment rates and forced businesses to shutdown.

“We are in a completely unpredictable environment... The pandemic has a grip on the economy, and it doesn’t seem likely to loosen until vaccines are widely available,” Citigroup Chief Executive Officer Michael Corbat said on an earnings call.

So far Citi, the third largest credit card issuer in the United States, has offered forbearance on 2 million credit card accounts representing 6% of balances, the bank said.

“The second quarter was the full quarter impact of COVID-19, and we expect that Q3 will also have significant concerns related to the consumer,” said Kenneth Leon, research director at CFRA Research in New York.

“The banks are still uncertain whether we’re in a U-shape or W-shape scenario, but clearly, a V-shape recovery in the third quarter is not expected.”

TRADING BOOST

However, the lender beat analysts’ estimates for profit as its trading desks cashed in on the market volatility caused by the crisis.

Bond trading revenues surged 68%, and also helped offset rock-bottom interest rates that make it harder for banks to earn money on lending.

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Net interest income, or the difference between what a bank pays for deposits and earns from loans, was down 7%.

Another source of support was an increase in fees from follow-on issues and new debt issuance as companies looked to shore up their financial position to weather the COVID-19 pandemic. Investment banking revenue rose 37% year-over-year.

The New York-based bank reported a profit of $1.32 billion, or 50 cents per share, for the three months ended June 30, down from $4.8 billion, or $1.95 per share, a year earlier.

Revenue rose 5% to $19.77 billion.

Analysts on average had estimated $19.12 billion in revenue and earnings of 28 cents per share, according to Refinitiv data.

End of period deposits, however, surged 18% to $1.23 trillion at Citi as stimulus programs left consumers and corporate clients with more cash to help them ride out the economic consequences of the pandemic.

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Total loans, however, fell marginally to $685 billion.

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