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Banks over $50B refine CECL estimates

Every U.S. bank holding company with more than $50 billion in assets has disclosed how a new accounting standard will impact loan loss reserves, a review of regulatory filings shows.

Several of the nation's largest banks have provided multiple disclosures over the last year on the effect of the current expected credit loss, or CECL, accounting standard. The vast majority of banks project a significant increase in loan loss reserves to comply with the standard.

Most of the banks with multiple disclosures have reiterated their initial estimates or narrowed an estimate range in the latest disclosures. Bank of America Corp. was an exception, meaningfully changing its estimate. In the bank's most recent disclosure, executives predicted an increase of "up to approximately 30%" in the bank's allowance for credit losses. Three months earlier, management projected a reserve build of "up to 20%." The bank attributed the jump to refinements in its model and to certain loan sales.

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JPMorgan Chase & Co. has stuck to its forecast of a $4 billion to $6 billion build in its allowance. That would represent a 30% to 45% increase from the bank's third-quarter 2019 loan loss reserve total. Citigroup Inc. also stuck to its range of an expected 20% to 30% build in its credit loss reserves.

A handful of banks are projecting decreases to loss allowances rather than increases. Wells Fargo & Co. expects to record a reserve release of $1.4 billion, changed slightly from from an initial projection of a release of $1.5 billion.

Some banks have narrowed their estimate ranges as the implementation date approaches. For example, PNC Financial Services Group Inc. pegged its expected impact as a 20% increase in the bank's most recent disclosure, compared to an earlier range of 15% to 25%. Similarly, Regions Financial Corp. expects CECL adoption will require an increase of $500 million to $600 million in its allowance for credit losses, tightened from a previous disclosure for a $400 million to $600 million increase.

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