US Banks Q3 '22 Reserves
Even with the upcoming recession becoming more certain, it is probably a mild one - according to big banks’ reserve change in Q3.
The largest 4 banks in the U.S. - JP Morgan, Bank of America, Citi, and Wells Fargo - collectively raised their allowances for credit losses by 2.8% Q/Q, or $1.8 billion.
A quick timeline:
🟥 In 2020, big 4 banks quickly raised the reserves by 76% or $45 billion, in fear of the severe impact of the pandemic.
🟩 In the 6 quarters since Q4 2020, 91% of the reserves build-up or $41 billion was gradually released. The worst was avoided with various public relief and private forbearance programs.
🟨 In Q3 2022, after the slight increase, the total reserves are 12% or $7 billion more than the pre-pandemic level in Q1 2020.
Sources: Company quarterly financial releases.