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  • Frank Tian

US Banks Reserves Update

🚨 With the banking crisis in March,


What is the impact on US banks' upcoming credit loss?


Based on the latest Q1 ‘23 reserve changes, little changes are expected.


The biggest 4 banks actually slowed down their increases of allowances for credit losses - only 0.8% Q/Q, or $0.5 billion.


This speaks to the quality of bank loans and the large banks’ assessment of the macroeconomy, despite recent negative events.


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 Q1 2023, after the slight increase, the total reserves are 17% or $10 billion more than the pre-pandemic level in Q1 2020.


Sources: company quarterly reports.


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