Four Biggest Lenders in U.S. Wrote Off $3.4B in Bad Consumer Loans in Q1 2023

The four biggest U.S. lenders—Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., and Wells Fargo & Co.—wrote off a combined $3.4 billion in bad consumer loans during the first quarter of the year, up 73 percent from Q1 2022. The write-offs combined with other reserves increased provisions at all four institutions to levels similar to the beginning of the COVID-19 pandemic.

“We continue to see some gradual weakening in underlying credit performance, including higher nonperforming assets,” said Mike Santomassimo, Chief Financial Officer of Wells Fargo, according to Bloomberg. “We are proactively monitoring our clients’ sensitivity to inflation and higher rates and are taking appropriate actions when warranted.”

As credit losses fell to record low levels over the last several years, banks benefited from consumers’ positive financial situations. However, as record high levels of inflation cause consumers’ savings to dwindle, Americans are starting to fall behind on payments. Bank executives have urged that the increase in provisions is due to consumers returning to pre-pandemic ‘norms.’

At Bank of America, firmwide provisions were unexpected, but aided by reserve releases on corporate loans. However, the bank was required to set aside $360 million in reserves tied to consumer business, which the institution blamed on high credit card balances.

Wells Fargo accredited its $1.2 billion in provisions to higher net charge-offs in commercial and consumer loan portfolios, and said that it began toughening underwriting standards for credit card loans as the economy slows down.

At JPMorgan Chase, bad credit card loans rose to $922 million in Q1, up 82 percent from 2022, and the 30-day delinquency rate rose to 1.68 percent, up from 1.09 percent last year. The bank said its focus is improving its real estate portfolio as investors raise concerns about rising losses.

Citigroup noted that the rise in credit losses was entirely expected. CEO Jane Fraser said that “we can’t just rely on FICO scores for assessing the credit of our customers and our portfolio,” so the bank is depending on detailed data to keep track of how consumers are handling their debt.