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Big banks cut credit-loss reserves as CRE stress eases
Goldman Sachs reduced provisions for credit losses by 38% to $102 million, while Bank of America and JPMorgan each cut PCL by more than 10%.
Bisnow reports that five of the largest U.S. banks, including JPMorgan Chase, Goldman Sachs, Bank of America, Citigroup, and Wells Fargo, posted second-quarter earnings on Tuesday that pointed to improving credit conditions tied to commercial real estate.
The article says artificial intelligence and data center development dominated major banks’ discussions as concerns about pandemic-era commercial mortgage quality and delinquencies faded. Bank of America CEO Brian Moynihan said issues tied to prior real estate lending and private capital are not showing up as much as people expected.
Bisnow also highlights that banks are gaining confidence, cutting provisions for credit losses that cover their loan books as results remain strong and the real estate sales landscape appears resilient. It notes transaction volumes rebounded in May after an April collapse in activity.
In specific examples from the earnings, Goldman Sachs cut its already modest $315 million in first-quarter provisions for credit losses by 38% to $102 million by end of June. Bank of America and JPMorgan Chase also cut their PCL by more than 10% to $1.4 billion and $2.5 billion, respectively, while Wells Fargo reported its allowance for credit losses rose modestly quarter over quarter to about 1.4% of loan volume, still below 1.6% a year earlier, reflecting improvement in its real estate loan portfolio.