Bloomberg reports that consumer loan write-offs increased 73% in the first quarter of 2023.
04/19/2023 1:45 P.M.
2 minute read
The four largest banks in the country wrote off $3.4 billion in bad loans during the first three months of 2023, a 73% increase from the same time last year, according to an April 18 Bloomberg News report.
Record inflation rates have had a major impact on personal spending for more than 90% of adults surveyed by Encore Capital Group, ACA International previously reported. Consumers say they are spending more on groceries, gas/utilities and housing. Additionally, 35% of U.S. adults report having past-due debt and are more likely to be accumulating, rather than reducing, those debts.
Economist Dr. Chris Kuehl told ACA members in January that consumers who make under $50,000 annually are spending a great deal of their credit to the point where inflation has eaten into their income and they’re paying for necessities with credit.
“But so far, bank executives have been adamant that the recent increase in provisions is nothing more than losses returning to normal after pandemic-era government stimulus programs kept consumer defaults artificially low,” according to the Bloomberg article.
Bank of America Chief Financial Officer Alastair told reporters on a conference call, “We haven’t seen any cracks in that portfolio yet. The consumer is in great shape.”
JPMorgan Chase & Co., the world’s largest credit-card issuer, said bad card loans hit $922 million in the first quarter, up 82% from a year earlier.
“I wouldn’t use the word credit crunch,” CEO Jamie Dimon said on a conference call. “Obviously, there’s going to be a little bit of tightening and most of that will be around certain real estate things.”
Citigroup Inc. CEO Jane Fraser said the bank is relying on extensive data to track consumers who borrowed money and assess how they’re handling their debt obligations.
“We can’t just rely on FICO scores for assessing the credit of our customers and our portfolio,” Fraser said. “There is a tremendous amount of data that we draw upon that goes well, well beyond that and that’s also, as you can imagine, something that gives us a lot more confidence.”
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