Quarterly report pursuant to Section 13 or 15(d)

ALLOWANCE FOR CREDIT LOSSES

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ALLOWANCE FOR CREDIT LOSSES
3 Months Ended
Mar. 31, 2024
Credit Loss [Abstract]  
ALLOWANCE FOR CREDIT LOSSES ALLOWANCE FOR CREDIT LOSSES
Allowance for Credit Losses - Roll-forward
The following tables present ACL activity by portfolio segment.
(dollar amounts in millions) Commercial Consumer Total
Three months ended March 31, 2024
ALLL balance, beginning of period $ 1,563  $ 692  $ 2,255 
Loan and lease charge-offs (74) (54) (128)
Recoveries of loans and leases previously charged-off 19  17  36 
Provision for loan and lease losses 81  36  117 
ALLL balance, end of period $ 1,589  $ 691  $ 2,280 
AULC balance, beginning of period $ 66  $ 79  $ 145 
Provision (benefit) for unfunded lending commitments (13) (10)
AULC balance, end of period $ 69  $ 66  $ 135 
ACL balance, end of period $ 1,658  $ 757  $ 2,415 
Three months ended March 31, 2023
ALLL balance, beginning of period $ 1,424  $ 697  $ 2,121 
Loan and lease charge-offs (52) (47) (99)
Recoveries of loans and leases previously charged-off 23  19  42 
Provision for loan and lease losses 62  16  78 
ALLL balance, end of period $ 1,457  $ 685  $ 2,142 
AULC balance, beginning of period $ 71  $ 79  $ 150 
Provision for unfunded lending commitments
AULC balance, end of period $ 75  $ 82  $ 157 
ACL balance, end of period $ 1,532  $ 767  $ 2,299 
At March 31, 2024, the ACL was $2.4 billion, a marginal increase of $15 million compared to December 31, 2023. The increase in the total ACL was primarily driven by loan and lease portfolio growth.
The commercial ACL was $1.7 billion at March 31, 2024 and $1.6 billion at December 31, 2023. The increase of $29 million since year end was primarily due to loan growth in the commercial portfolio.
The consumer ACL was $757 million, a modest decrease from the December 31, 2023 balance of $771 million, with the decrease is primarily attributable to lower residential mortgage reserves based on the current macro-economic forecast.
The baseline economic scenario used in the March 31, 2024 ACL determination included the federal funds rate projected to have peaked during the third quarter of 2023, remaining at this terminal level until mid-2024 as the Federal Reserve has continued to address inflation levels and tightness in the labor market. The Federal Reserve is expected to complete four 25 basis point rate cuts by the end of 2024. Further subsequent cuts of 25 basis points per quarter are expected in 2025 and 2026 until reaching 3% by the second half of 2026. Inflation is forecasted to drop from 2.9% in first quarter of 2024, approaching the Federal Reserve’s target level of 2% by the fourth quarter of 2024. Unemployment is projected to gradually increase, peaking at 4.1% in the first quarter of 2025 before marginally improving to 4.0% by 2026.
The economic scenarios used included elevated levels of economic uncertainty including the impact of specific challenges in the commercial real estate Industry, recent inflation levels, the U.S. labor market, the expected path of interest rate changes by the Federal Reserve, and the impact of significant conflicts on-going around the world. Given the uncertainty associated with key economic scenario assumptions, the March 31, 2024 ACL included a general reserve that consists of various risk profile components to address uncertainty not measured within the quantitative transaction reserve.