Banks Rake In $10B in Fees in Phase 1 of PPP

4/24/20

By Bram Berkowitz, Motley Fool

Banks brought in a whopping $10 billion in fees from the government's $350 billion emergency lending small business Paycheck Protection Program (PPP), according to an analysis by NPR.

That's a good amount when you consider that all banks in the country in the first quarter of 2019 brought in roughly $65 billion in non-interest income, which includes almost all fee income at banks. And the $10 billion was made in a two-week time period.

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IMAGE SOURCE: GETTY IMAGES

Part of the $2 trillion stimulus bill, the PPP allowed the U.S. Small Business Administration (SBA) in partnership with banks to issue loans of up to $10 million to struggling small businesses.

Portions of the loans businesses used for expenses such as payroll do not need to be paid back, so there will likely not be a lot of interest income from the loans. However, the government is paying banks a fee for each loan they originate.

Banks can make 5% for loans of not more than $350,000; 3% percent for loans of more than $350,000 and less than $2 million; and 1% for loans of at least $2 million.

While the PPP ran out of money, Congress recently allocated an additional $310 billion to the program.

The large banks are likely to profit the most from the fees. JPMorgan Chase (NYSE:JPM) said it received total loan requests equaling $40 billion-it had only funded $14 billion before the program ran out of money.

Bank of America (NYSE:BAC) said it had received $43 billion in total PPP requests.

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