:quality(70)/cloudfront-us-east-1.images.arcpublishing.com/elfinanciero/ZNLJGMSTURE5BLGTBJEEBKLKKU.jpg "Major US banks write off .4 billion in bad consumer loans – El Financiero")
Bank of America (BofA) It joined its biggest competitors in booking more as a growing number of consumers couldn’t keep up loan payments, Even as executives eased fears of an impending crisis.
The four largest lenders in the United States Canceling $3.4 billion in bad consumer loans in the first three months of 2023, an increase of 73 percent over the previous year. That, along with the additional reserves, boosted provisions at the four institutions to levels not seen since the early days of the COVID-19 pandemic.
For years, banks have benefited from the financial strength of American consumers, as credit losses have fallen to record low levels. Now, with once-in-a-generation inflation levels eroding their savings, Americans are once again starting to default.
But so far, bank executives have insisted that the recent increase in provisions is nothing more than a return to normal after losses. Government stimulus programs in the age of a pandemic Keep consumer defaults artificially low.
“We haven’t seen any cracks in that portfolio yet,” Bank of America Chief Financial Officer Alastair Borthwick said on a conference call with reporters on Tuesday. “The consumer is doing well.”
At Charlotte, North Carolina-based Bank of America, provisioning at the company level was lower than expected, supported by reserve issuances linked to corporate loans, according to a statement. However, the company had to book an additional $360 million in reserves associated with its consumer business, which the bank attributed to Higher than expected credit card balances.
At Goldman Sachs, the Platform Solutions division that includes the company’s growing credit card efforts saw provisions rise to $265 million in the quarter. giant Wall Street This increase was due in part to an increase in net debits from its credit card portfolio.
gradual weakness
Wells Fargo and Company He attributed $1.2 million in appropriations to Increased net cancellations in commercial and consumer loan portfolios. The San Francisco-based company said Friday that it has begun to tighten underwriting standards for credit card loans as it seeks to position its debt portfolio in the event of a slowing economy.
“We continue to see gradual weakening in the underlying credit performance, including higher non-performing assets,” Chief Financial Officer Mike Santomasimo said on a conference call with analysts. “We are watching proactively Our clients’ sensitivity to inflation and higher rates We are taking appropriate action when necessary.”
JPMorgan Chase and co. Inc., the world’s largest issuer of credit cards, said bad card loans rose to $922 million in the first quarter, up 82 percent from a year earlier. The 30-day default rate on those loans, a harbinger of future losses, rose to 1.68 from 1.09 percent a year earlier.
However, executives at the New York-based bank said they were not taking aggressive action in response. Instead, the company is focusing on adjusting its real estate portfolio as investors become increasingly concerned about mounting losses on office loans.
“I’m not going to use the word credit crunch,” CEO Jamie Dimon said on a conference call Friday. “Obviously there will be some adjustment and most of that will be around certain real estate things.”
Citigroup reassured investors on Friday that the increase in credit losses in the first quarter was fully expected. Chief Executive Jane Fraser said the New York-based bank relies on massive amounts of data to track consumers who have borrowed money from Citigroup and how they handle their credit obligations. religion.
“We cannot rely solely on FICO scores to assess the credit of our clients and our portfolio,” said Fraser. “There’s a huge amount of data that we rely on that goes further than that, and that’s also, as you can imagine, something that gives us a lot of confidence.”
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