Most US banks reported lower provisions for credit losses in the recently ended quarter, with credit trends appearing to be normalizing instead of deteriorating.

Of the 92 select banks that reported 2023 fourth-quarter earnings as of Jan. 26, 47 banks booked lower provisions for credit losses sequentially, and 44 banks cut their provisions year over year, according to an S&P Global Market Intelligence analysis. Meanwhile, 50 of the banks logged quarter-over-quarter increases in their net charge-offs (NCOs), and 69 reported higher NCOs compared with the year-ago period.

There were no major concerns on credit during the quarter, Piper Sandler analyst R. Scott Siefers said in a note covering his post-earnings thoughts on large regional banks.

"Oddly, credit feels a bit like less of an issue than it did 90 days ago at this time. ... Lower-end consumers and known pressure points such as office [commercial real estate] continue to dominate the discussion. Otherwise, however, 'normalization' rather than 'deterioration' seems to be the operative word," Siefers wrote.

At $50 billion-plus banks

Provisions for credit losses increased sequentially at three of the Big Four US banks, with Citigroup Inc. reporting the highest at $3.52 billion, up $1.71 billion from the previous quarter and $1.70 billion from the prior-year quarter.

Citi is confident about the quality and mix of its portfolio and is "well-reserved for the current environment," CFO Mark Mason said on the company's 2023 fourth-quarter earnings call.

"[Allowance for credit loss] builds in 2024 will primarily be a function of the volume growth that we see as well as changes in the macro scenarios and the probabilities associated with them. And we expect continued momentum in card, albeit more in line with mid-single-digit loan growth," Mason said.

JPMorgan Chase & Co. booked the second-highest provision at $2.76 billion, an increase of $1.38 billion from the 2023 third quarter and $474.0 million from the 2022 fourth quarter.

The company reported NCOs of $2.2 billion and a net reserve build of $474 million. "The net reserve build was primarily driven by loan growth in card and the deterioration in the outlook related to commercial real estate valuations in the commercial bank," CFO Jeremy Barnum said on JPMorgan's 2023 fourth-quarter earnings call.

– Download a template to compare a bank's financials with industry aggregate totals. – Download a template for a comprehensive profile on a selected bank or thrift. – View US industry data for all US banks.

Bank of America Corp.'s provision was $1.10 billion, down $130.0 million from the linked quarter — the largest sequential decrease among banks with more than $50 billion in assets — but up $12.0 million from a year ago.

BofA's provision expense consisted of $1.2 billion in net charge-offs and a modest reserve release that reflects an improved macroeconomic outlook, CFO Alastair Borthwick said on the company's 2023 fourth-quarter earnings call.

"Net charge-offs reflect the continued trend in consumer and commercial charge-offs toward more normalized levels as well as real estate office losses," Borthwick said.

PNC Financial Services Group Inc.'s provision rose by $103.0 million on a quarter-over-quarter basis to $232.0 million, marking the third-highest increase among the banks within the group. U.S. Bancorp recorded the largest year-over-year provision decline of $680.0 million to $512.0 million.

At $20 billion to $50 billion banks

Among banks with assets between $20 billion and $50 billion, First National of Nebraska Inc. reported the highest provision at $217.6 million, followed by Banc of California Inc. at $47.0 million.

Banc of California's first provision following the completion of its merger with PacWest Bancorp represented an increase of $47.0 million from the 2023 third quarter and an increase of $37.0 million from the 2022 fourth quarter.

"The merger process dictated that we take a close look at every loan in the portfolio of each legacy bank and make sure that they were appropriately rated as well as resolve some of the weaker credits," Banc of California President and CEO Jared Wolff said on the company's earnings call. "As a result, the bank has cleaner credit and a higher level of reserves following the provision that we recorded in the fourth quarter."

WaFd Inc., which has been in a pending deal to merge with Luther Burbank Corp. since November 2022, did not record a provision for credit losses in its first fiscal quarter of 2024, compared with a provision of $26.5 million in the previous quarter and $2.5 million in the prior-year period. The lack of provision was mainly because of a stable loans receivable balance and continued strong credit performance and collateral protection, according to an earnings release.

At $10 billion to $20 billion banks

Puerto Rico-based banks OFG Bancorp and First BanCorp. posted the highest and second-highest provisions for credit losses, respectively, among banks with assets between $10 billion and $20 billion. OFG Bancorp's provision was $19.7 million, and First BanCorp.'s provision was $18.8 million.

Within the group, three banks logged negative provisions, including Provident Financial Services Inc., which is in a deal to acquire Lakeland Bancorp Inc. Provident's provision was negative $863,000, down $13.4 million from the linked quarter and $2.7 million from a year earlier.