How Have Loan Charge-Off Rates For The Largest U.S. Banks Changed In The Last Five Quarters?
Loan charge-off rates for the largest U.S. banks have largely remained constant over the last five quarters:
Individual charge-off figures above are taken from the latest quarterly earnings releases for these banks. The weighted average charge-off rate represents the average charge-off rate for these banks as weighed by their portfolio of outstanding loans. The average figure for the U.S. banking industry is taken from data compiled by the Federal Reserve here.
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Having recovered from peak levels immediately after the 2008 recession, charge-off rates for U.S. banks have been unusually low over the last two years thanks to strong economic conditions. To put things in perspective, overall loan charge-off rates for U.S. banks were greater than 3% in 2009, but have hovered around 0.45% since mid-2014. However, there has been a slight but discernible increase in charge-off rates since Q3 2015 – something we attribute to a normalization in charge-off rates for the U.S. banking industry. We believe that charge-off rates are likely to increase over subsequent quarters before they settle down around their historically stable levels between 0.5-0.6%.
The chart below captures Bank of America’s mortgage loan provisions as a percentage of its mortgage portfolio. As higher charge-off rates result in a bank setting aside more cash as provisions to cover these losses, we include loan provisions in our analysis as a proxy for the actual charge-off rate.
See the links below for more information about the 5 largest U.S. commercial banks:
- What Were Total Loan Charge-off Rates For The Largest U.S. Banks In Q2 2016?
- What Was The Total Size Of Outstanding Domestic And Foreign Loans For The Largest U.S. Banks In Q2 2016?
- How Has The Total Loan Portfolio Of The Largest U.S. Banks Changed Over The Last 5 Quarters?
- How Much In Domestic And Foreign Deposits Did The Largest U.S. Banks Hold In Q2 2016?
- How Have Total Deposits For The Largest U.S. Banks Changed Over The Last 5 Quarters?
- How Have The Loan-To-Deposit Ratios For U.S. Banks Trended Over Recent Quarters?
- How Has The Total Loan Portfolio For The U.S. Banking Industry Changed Over The Last 5 Quarters?
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment/ ask questions on the comment section
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to the full Trefis analysis for U.S. Bancorp | Wells Fargo | JPMorgan | Bank of America | Citigroup
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