Big Banks' Consumer Loan Write-Offs Jump 73% in Q1

America’s biggest banks are downplaying a massive spike in write-offs of bad consumer loans.

As Bloomberg News reported Tuesday (April 18), the four largest banks in the country wrote off $3.4 billion in bad loans during the first quarter of this year, a 73% jump from last year.

Although record inflation has eaten away at consumers’ savings and caused them to fall behind on payments, bank executives insist that a recent rise in provisions is simply a function of losses going back to normal after COVID stimulus money brought consumer defaults to levels that were artificially low, the report said.

“We haven’t seen any cracks in that portfolio yet,” Bank of America Chief Financial Officer Alastair Borthwick said on a Tuesday conference call. “The consumer is in great shape.”

And JPMorgan Chase & Co., the largest credit card issuer in the world, said bad card loans jumped to $922 million in the first quarter, an 82% increase compared to a year earlier.

However, executives said last week that they don’t see a need for drastic response, and are rather paying more attention to the real estate market.

“I wouldn’t use the word credit crunch,” CEO Jamie Dimon said on Friday (April 14) conference call. “Obviously, there’s going to be a little bit of tightening and most of that will be around certain real estate things.”

As noted here last week, Dimon also said during the call that although the economy is on “healthy footings” and consumers still have robust balance sheets, “the storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks.”

PYMNTS has been noting the signs of increased pressure on consumers — especially those living paycheck to paycheck, which is more than half the country — to pay their credit card debts for the past few months.

Our research has found that paycheck-to-paycheck consumers are more than three times as likely as their peers to revolve credit card debt and carry higher monthly balances overall.

The average credit score for all consumers who live paycheck to paycheck is 664, which places them firmly in the “prime” category. But consumers who struggle to pay their bills every month, have a below-average credit score of 613, which is subprime.

More recently, the PYMNTS/LendingClub collaboration “New Reality Check: The Paycheck-to-Paycheck Report” found that consumers who have issues paying their monthly bills on average carry balances of 157% of their available savings — meaning they would still have a balance, even if they cleared out their savings accounts entirely to pay off their debts.