Quarterly report [Sections 13 or 15(d)]

ALLOWANCE FOR CREDIT LOSSES

v3.25.1
ALLOWANCE FOR CREDIT LOSSES
 3 Months Ended
Mar. 31, 2025
Credit Loss [Abstract]  
ALLOWANCE FOR CREDIT LOSSES ALLOWANCE FOR CREDIT LOSSES
The following table presents ACL activity by portfolio segment.
(dollar amounts in millions) Commercial Consumer Total
Three months ended March 31, 2025
ALLL balance, beginning of period $ 1,484  $ 760  $ 2,244 
Loan and lease charge-offs (74) (59) (133)
Recoveries of loans and leases previously charged-off 30  17  47 
Provision for loan and lease losses 80  25  105 
ALLL balance, end of period $ 1,520  $ 743  $ 2,263 
AULC balance, beginning of period $ 144  $ 58  $ 202 
Provision (benefit) for unfunded lending commitments 14  (1) 13 
AULC balance, end of period $ 158  $ 57  $ 215 
ACL balance, end of period $ 1,678  $ 800  $ 2,478 
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 3  (13) (10)
AULC balance, end of period $ 69  $ 66  $ 135 
ACL balance, end of period $ 1,658  $ 757  $ 2,415 
At March 31, 2025, the ACL was $2.5 billion, an increase of $32 million from December 31, 2024. The increase in the total ACL was driven by loan and lease growth, partially offset by a modest reduction in overall coverage ratios. The ACL coverage ratio at March 31, 2025 is reflective of the current macro-economic forecast and changes in various risk profiles intended to capture uncertainty not addressed within the quantitative reserve.
The commercial ACL was $1.7 billion at March 31, 2025, an increase of $50 million from December 31, 2024. The increase was driven by commercial loan growth.
The consumer ACL was $800 million at March 31, 2025, a decrease of $17 million from December 31, 2024. The decrease was primarily due to improvement in the forecasted path of the HPI index which is impactful to consumer real estate secured loans.
The baseline economic scenario used in the March 31, 2025 ACL determination assumes the labor market has softened with the unemployment rate forecasted to remain at 4.1% throughout 2025 before marginally increasing to 4.2% in 2026. The Federal Reserve is projected to continue the cycle of rate cuts that started in September 2024, with further cuts forecast throughout for the second half of 2025 and throughout 2026 until reaching a federal funds rate of 3% by the end of 2026. Inflation is forecast to be 2.8% for the first quarter of 2025 and is expected to remain at similar levels throughout 2025 before approaching 2.5% by the end of 2026. GDP is forecast to decline from the estimated first quarter 2025 level of 2.5%, ending the fourth quarter of 2025 at 1.6% before marginally improving to 1.9% by the end of 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 impacts of U.S. trade policies, 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, 2025 ACL included a general reserve that consists of various risk profile components to address uncertainty not measured within the quantitative transaction reserve.