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A woman passes by a JPMorgan Chase bank in Times Square in New York City on March 7, 2019.

Brendan McDermid/Reuters

How much money will U.S. banks lose on loans because of the coronavirus recession?

Analysts and investors have been struggling to come up with an answer – or at least a reasonable guess – ahead of quarterly reports from JPMorgan Chase & Co, Bank of America Corp , Wells Fargo & Co, and Citigroup Inc next week.

Wall Street estimates have changed dramatically from a month ago. Then, analysts called for big bank earnings per share to rise in the first quarter from a year earlier by an average of 2%. Now they see declines ranging from 14% to 42%, according to Refinitiv data.

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That is not just because the impact of the global pandemic is changing and hard to quantify, but also because of a new accounting standard that requires banks to estimate losses for the lifetime of loans and set aside money now to cover them.

Those estimates have to be justified to regulators and auditors, and be credible to investors. But they ultimately rely on judgment: a pessimistic management team could decide to take much bigger provisions than optimistic peers at a rival bank, even if they have similar loan books.

To show the difficulty in guessing how that might play out, UBS bank analysts created a table showing two outcomes for earnings per share: one with usual loss reserves, and another that was about one-third lower, based on their assumptions about the new rule.

“And, the truth is we’re probably going to be very wrong,” lead analyst Saul Martinez said in an interview. “The risk is that it is higher.”

Goldman Sachs analysts led by Richard Ramsden cut their estimates for big banks for all of 2020 by 40% this week, all due to additional loan-loss provisions. Other issues affecting earnings essentially cancel each other out, they said.

The coronavirus pandemic has put millions of people out of work, shut off revenue for many companies and led the U.S. government to pour trillions of dollars into financial markets, corporate bailouts and Main Street stimulus programs. No one is sure how long the pandemic will last or what the economy will look like once it is over.

At its core, the uncertainty about bank results reflects uncertainty about the coronavirus, but the new accounting standard adds another layer of mystery for banks. Although they have more insight about the financial stress of their borrowers, and therefore more insight about the economy, they do not have a crystal ball about the coronavirus.

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Bank executives are also mindful that they could send shockwaves through markets if investors believe they are predicting a protracted and horrid recession, or are not taking the risks seriously enough.

“It is going to be a tricky balancing act,” said Martinez.

Analysts are eager to ask bank executives about assumptions they used for the new accounting standard, known as CECL, for Current Expected Credit Losses, and pronounced like the name Cecil. It has been in the works for a decade but only recently started being implemented.

Analysts and investors want to know how high bankers expect unemployment to go, how that will affect consumer loan delinquencies, and how much exposure they have to oil companies and sectors that have seen business vanish, like airlines, hotels and restaurants.

They will also inquire about how effective government stimulus programs have been.

Spending by the Federal Reserve and Treasury Department could keep loan losses from being as high as in prior recessions, said Wells Fargo bank analyst Mike Mayo. He described the first quarter as the most difficult one to predict since the peak of the global financial crisis in late-2008.

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“You have the biggest accounting change to impact loan loss reserving coming in the quarter that needs the biggest change in loan loss reserves,” he said.

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