Anticipate Increasing Credit Card Looses: Take Steps for Preparation Now
In the face of persistent inflation and economic uncertainty, U.S. banks are demonstrating resilience in their outlook on loan losses and loan loss reserves, particularly in the credit card sector.
Loan Loss Provisions Stable or Moderately Adjusted
Major banks, such as JPMorgan and Bank of America, have been adjusting their loan loss provisions. JPMorgan reduced its provisions in Q2 2025 to $2.4 billion, a decrease from previous quarters. Bank of America slightly increased provisions, from $1.5 billion to $1.6 billion, but emphasized that the increase was driven by macroeconomic forecasts rather than signs of new asset deterioration. Citigroup and Morgan Stanley, on the other hand, kept their reserves relatively steady [1][3][5].
Consumer Resilience in Credit Card Performance
Despite elevated interest rates, consumers have continued to spend robustly. Retail sales were stronger than expected in mid-2025. Credit card balances grew by $27 billion in Q2 2025 to $1.21 trillion, and credit card delinquency rates remained steady, indicating stable asset quality in consumer lending segments [1][4].
Loan Loss Reserves Coverage
U.S. banks have been bolstering loan loss reserves, with coverage ratios for delinquent loans approaching or exceeding 100%, signaling preparedness for potential future losses amid ongoing uncertainty [2].
Impact of Inflation and Economic Uncertainty
Although inflation and economic uncertainty persist, banks have seen limited new deterioration in credit quality. They remain cautious, especially regarding commercial real estate lending, maintaining a tight lending environment. New regulatory requirements are increasing transparency but also operational burdens for banks in monitoring loan modifications and borrower performance [1][3][5].
In summary, while the economic environment remains uncertain due to inflation and other factors, U.S. banks' outlook on loan losses and reserves, including credit card portfolios, shows resilience with cautious optimism supported by stable consumer credit behavior and proactive reserve management [1][2][3][4][5].
- The Wall Street Journal
- American Banker
- Bloomberg
- Federal Reserve Bank of New York
- Financial Times
- In the context of personal-finance and business, major banks like JPMorgan and Bank of America are making adjustments to their loan loss provisions, demonstrating a level of resilience amidst economic uncertainty.
- Despit e inflated interest rates, consumers are showing resilience in their credit card performance, as retail sales remain strong and credit card delinquency rates remain steady, supporting the stability of banks' personal-finance and credit card portfolios.
