Designed to save jobs and stimulate the economy by providing forgivable loans to small businesses affected by the coronavirus, the Paycheck Protection Program is also creating another winner: banks.
As of the end of June, more than $ 521 billion in PPP loans had been approved, according to the latest SBA data.
The top 10 lenders will receive an estimated total of more than $ 3.8 billion, S&P Global Market Intelligence found. JPMorgan Chase, which is APP’s largest lender after making loans worth nearly $ 29 billion, is on track to earn around $ 864 million in commissions. Bank of America, the next largest, will collect approximately $ 755 million in commissions on its PPP loans.
In its analysis, S&P Global Market Intelligence assumed that banks charged a 3% fee, which is the average fee for PPP loans, according to Keefe Bruyette & Woods. Under Treasury Department rules, application lenders can charge processing fees between 1% and 5%, depending on the loan amount.
Lenders are prohibited from charging fees to small businesses applying for PPP loans; instead, the SBA will cover the costs.
While the revenue from the APP fees is a small part of the total revenue of the large banks, the program is likely to be a windfall for at least 31 smaller lenders, generating more APP fees than the revenue. totals. . throughout 2019. Those smaller banks include New Jersey-based Cross River Bank, which partners with several fintech lenders; You can expect to raise more than $ 163 million in fees, or 170% of your 2019 revenue.
Still, S&P Global Market Intelligence notes that banks cannot immediately account for fees as income; they have to wait until the loans are forgiven or repaid by the company, which could take years. While many APP borrowers await loan forgiveness, which would allow banks to collect those fees by the end of 2020, the requirements and timeline for loan forgiveness have changed, particularly as the program itself has been extended for the week. happen.
