Provisions for expected credit losses at US banks decreased for the first time in two years, falling to $19.48 billion in the first quarter.

The total represents a sequential decrease of $831 million from $20.32 billion a quarter earlier, according to S&P Global Market Intelligence data. The sequential decline is a break from a seven-quarter trend of increases that started in the second quarter of 2021, even as the Federal Reserve continues to raise interest rates and recession fears loom over the economy.

Provisions rise at majority of biggest banks

While credit loss provisions fell overall for the banking industry, 11 of the 20 largest depository institutions reported quarter-over-quarter increases.

JPMorgan Chase & Co., the largest US bank based on total assets as of March 31, reported a first-quarter provision of $2.05 billion, down from $2.43 billion in the linked quarter. The company's ratio of reserves as a percentage of gross loans increased quarter over quarter to 1.71%.

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"The net [reserve] build of $1.1 billion was largely driven by deterioration in our weighted average economic outlook," CFO Jeremy Barnum said during an earnings call.

The net reserve build reflects a weighted average peak unemployment rate of 5.8% in the event of a recession, Barnum added.

Fourteen of the 20 largest banks in the US reported quarter-over-quarter increases in their reserves as percentages of gross loans, while four reported decreases. Two banks reported no change.

Total reserves rise again

Total reserves rose for the fourth consecutive quarter and climbed above $200 billion for the first time since the first quarter of 2021, when they were just beginning a long decline from a peak set during the COVID-19 pandemic. The industry booked $202.22 billion in total reserves in the first quarter, up from $195.30 billion in the linked quarter. Reserves as a percentage of total gross loans increased to 1.66% from 1.60%.