NEW YORK–Consumers are starting to fall behind on their credit card and loan payments as the economy softens, according to some of the country’s biggest U.S. banks, although delinquency levels remain modest.
As CUToday.info reported earlier, profits at the nation’s big four banks—Bank of America, Wells Fargo, JPMorgan Chase and Citigroup—were robust in their most recent earnings statements.
"We've seen some consumer financial health trends gradually weakening from a year ago," Wells Fargo Chief Financial Officer Mike Santomassimo said on a recent conference call to discuss its first quarter results, Reuters reported.
While delinquencies and net charge-offs have slowly risen as expected, consumers and businesses generally remain strong, the bank's CEO, Charlie Scharf, said, according to Reuters. Wells Fargo set aside $1.2 billion in the first quarter to cover potential soured loans.
Citigroup also made larger provisions for credit losses even as it brought in more revenue from clients' interest payments on credit cards, Reuters reported. The banks CFO, Mark Mason, said delinquency rates were rising as anticipated, but still stood below normal levels in the bank's "very high quality" loan portfolio.
‘Tightened Standards’
"We have tightened credit standards specifically as a result of the current market environment in cards, we continue to calibrate our credit underwriting based on what we're seeing based on macroeconomic trends," Mason was quoted as saying.
According to the Reuters report, Mason said delinquency rates will probably return to "normal" levels of 3% to 3.5% for branded cards and 5% to 5.5% for retail services by early 2024, Mason said. Current delinquency rates are 2.8% for branded cards and 4% for retail services, according to Citi's presentation on its earnings.
Bank of America provisioned $931 million for credit losses in the quarter, much higher than the $30 million a year prior, but below the fourth quarter $1.1 billion provision. Total net charge-offs with credit reached $807 million, increasing from the former quarter but still below pre-pandemic levels, the bank said in its earnings release.
Not a ‘Problem’
At BofA, CFO Alastair Borthwick stated, "The consumer's in great shape in terms of credit quality by any historical standards. Employment remains good, wages remain good, and we haven't seen any cracks in that portfolio yet.”
Meanwhile, Reuters reported that some of JPMorgan's customers were starting to fall behind on payments, but delinquency levels were still modest, according to Jeremy Barnum, finance chief at the largest U.S. lender.
“We are not seeing a lot there to indicate a problem,” he said.
The bank more than doubled the amount it set aside for credit losses in the first quarter from a year earlier, to $2.3 billion, reflecting net charge-offs of $1.1 billion.
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