US banks' Q1 credit loss provisions mostly below estimates despite uncertainty

Many US banks recorded lower-than-estimated provisions for credit losses in the first quarter even as macroeconomic uncertainty heightens.

Around 60% of the 82 banks that released first-quarter results as of April 25 booked provisions for credit losses below the consensus estimates, according to S&P Global Market Intelligence data. Roughly 68% of the banks recorded lower-than-estimated net charge-offs (NCOs).

Large banks showed confidence in the strength of their customers but did not provide "much definitive clarity on where things are headed" against the backdrop of elevated uncertainty, Piper Sandler analyst R. Scott Siefers said.

While the banks began rationalizing expectations through softened revenue outlooks, "it is not clear that softened expectations were enough to address what may be coming," the analyst wrote in an April 27 research note.

$50 billion-plus banks

Wells Fargo & Co.'s first-quarter provision was $932.0 million, $297.8 million lower than the consensus estimate. While there was no weakness in Wells Fargo's consumer or commercial loan books, "when setting the allowance [for credit losses] in the first quarter, we made a modest adjustment to reflect the potential economic weakness that could develop," CFO Michael Santomassimo said during an earnings call.

U.S. Bancorp also included some incremental qualitative reserves in its first quarter allowance, reflecting higher macroeconomic uncertainty due to tariffs, CFO John Stern said during an earnings call. The company's provision was $537.0 million, $43.1 million below the consensus estimate.

"Our loan portfolio is well diversified, and we are appropriately reserved and prepared for a wide range of potentially adverse macroeconomic conditions," Stern said.

PNC Financial Services Group Inc. reported a provision $69 million below estimations at $219 million. An increase in the downside weightings of its CECL economic scenarios when setting its first-quarter reserves was accounted for. The reserves also included "some considerations for tariffs," which could raise the possibility of a recession if they are implemented and remain in effect for the long term, CFO Robert Reilly said during an earnings call.

While PNC is examining its portfolios for potential impact, "we view the current environment [as] too fluid to reasonably change our estimates at this time," Reilly said.

JPMorgan Chase & Co., the biggest US bank by total assets, booked a first-quarter provision of $3.31 billion, $556.0 million higher than the consensus estimate. JPMorgan's allowance for credit losses reflected an increase in the probability weightings connected with the downside scenarios in its CECL framework, considering "significantly elevated risks and uncertainties" at the end of the first quarter, CFO Jeremy Barnum said during an earnings call.

Valley National Bancorp, which also posted an expectation-beating provision, anticipates its full-year 2025 provision to decline about 50% from the prior year, Chairman and CEO Ira Robbins said. This considers Valley's current expectations for the credit environment, CFO Travis Lan said during an earnings call.

$20B to $50B banks

Among banks with assets between $20 billion and $50 billion, Bank OZK reported the highest provision for credit losses at $38.4 million, $1.9 million lower than the consensus estimate.

Simmons First National Corp. recorded a provision of $26.8 million, including $15.6 million of incremental provision expense associated with two credit relationships migrated to nonperforming status in the first quarter. The company discovered a deposit fraud event involving entities affiliated with the borrower in one of the two credit relationships, resulting in higher adjusted noninterest expenses.

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$10B to $20B banks

Of banks with assets between $10 billion and $20 billion, First Busey Corp.'s provision of $45.6 million was the highest and was $31.3 million above the consensus estimate. Two banks within the group logged negative provisions. Pacific Premier Bancorp Inc. recorded a $3.7 million provision reversal, and CVB Financial Corp. booked a $1.5 million provision recapture.