credit conditions in us mktchw lends on equipment purchases in us (and smaller biz in canada), and to lots of small/mid-sized biz, and some secured by management credit/personal credit. more than 2/3rds of chw us new loans are to prime credits , so credit thots of 4 biggest american banks relevant imo. w/inflation, higher rates and general worries, wud think credit wud show some signs of cracking, but still seems good shape (both commercial and personal). chw very little exposure to real estate. and doing last abs (aug 2022) and paying down warehouse and revolver facilities means less exposure to higher floating rates. shud be another decent qtr. now bringing in almost 1/3rd of a billion in receivables collections every 90 days. cud shrink balance sheet if wanted to (by cutting originations), but with amount already securitized, and credit still ok, no need imo.
bank of america q3 transcript:
“First, consumers continue to spend at strong levels. Second, Consumer customer average deposit levels for September 2022 remain at multiples of the pre-pandemic levels. Third, there's plenty of capacity for borrowing as credit and card balances of BAC are still 12% below pre-pandemic levels, and the payment rates on those credit cards are 1,000 basis points over pre-pandemic levels.
So in spending, a couple of thoughts. An analyst might wonder whether talk of inflation, recession and other factors would result in slower spending growth. We just don't see it here at Bank of America. Year-to-date spending of $3.1 trillion through September is up 12% compared to last year. Second, as you look across the period, you can see in the trend of year-over-year spending. As we entered the pandemic, we saw spending decline and click or recover and grow across the quarters. And while still strong in September 10%, spending growth has slowed just a bit from the 12% year-to-date pace, which shows you that early in the year was a faster year-over-year growth rate, but still strong. And the first two weeks of October show that strength is still growing at 10%.
It’s notable that isn't just inflation that is driving spending as transactions are up single digits year-over-year pretty consistently. You'll also note on the bottom left, the continued growth in goods and services, particularly retail toward experiences of travel and entertainment. While fuel price volatility continues, it is not currently impacting the spend levels in this quarter as prices stabilize.
On a level of customer liquidity -- the level of customer liquidity remains strong. Average deposit balances of our Consumer customer remained at high levels relative to a year ago. These balances are still multiples of the pre-pandemic periods, and they were largely unchanged at these elevated amounts for the month of September. These deposit levels suggest continued capacity to strengthen at healthy levels.
Whether you look at early or late-stage card delinquencies, they all remain well below our pre-pandemic levels. These are decades-old lows, and we're just now seeing gradual move off these lows and early-stage delinquencies. Late-stage delinquencies are still 40% below pre-pandemic levels. Keep in mind, asset quality metrics were strong even before the pandemic.
On this page, what you see is a 30 to 90 day card delinquencies. If you compare them against the average for the past five years leading up to the pandemic, a period of growth and unemployment falling, those averages were 183 basis points and 91 basis points, respectively. So the current ratio of delinquencies have to be worse than 30% or more to even approach that five-year pre-pandemic average at a time of economic growth and falling unemployment. So consumers remain resilient.”
jp morgan q3 transcript:
q: Would appreciate any perspective in terms of are you beginning to see cracks, either be it commercial real estate, consumer where it feels like the economic pain from inflation, higher rates is beginning to filter through to your clients? I would appreciate any insights there.
a: “The short answer to that question is just no. We just don’t see anything that you could realistically describe as a crack in any of our actual credit performance. I made some comments about this in the prepared remarks on the consumer side. But we’ve done some fairly detailed analysis about different cohorts and early delinquency bucket entry rates and stuff like that. And we do see, in some cases, some tiny increases. But generally, in almost all cases, we think that’s normalization, and it’s even slower than we expect.”
citibank:
“The U.S. economy, however, remains relatively resilient. So while we are seeing signs of economic slowing consumers and corporates remain healthy, as our very low net credit losses demonstrate. Supply chain constraints are easing, the labor market remains strong, so it is all a question of what it takes to truly tame persistently high core inflation.”
wells fargo:
“Credit quality remains strong and we continue to invest in our technology platforms, digital capabilities, and delivering additional products to our customers and clients. While we are closely monitoring trends with economic conditions expected to weaken given inflation, geopolitical instability, energy price volatility, and rising interest rates, our customers continue to be resilient with overall strong credit performance and solid cash flow.
Overall, our consumer deposit customers' health indicators, including cash flow, payroll, and overdraft trends, are still not showing elevated risk concerns.
Credit performance remained strong, with net charge-offs and non-accrual loans continuing to decline from exceptionally low levels. Clients do tell us that they continue to be impacted by persistent inflation, rising interest rates, and tight labor market. And while credit quality remains strong, we are actively monitoring inflation-sensitive industries and taking proactive actions where warranted.
Turning to credit quality, credit performance remained strong, with only 17 basis points of net charge-offs in the third quarter. However, as expected, losses are slowly increasing from historical lows and we expect them to continue to normalize toward pre-pandemic levels over time as the Federal Reserve continues to take actions to combat inflation. We are closely monitoring our portfolio for potential risks and are continuing to take some targeted actions to further tighten underwriting standards. Commercial credit performance remained strong across our commercial businesses, with only $6 million of net charge-offs and net recoveries in our commercial real estate portfolio for the third consecutive quarter.
As it relates a little bit more broadly on credit, for the most part, the portfolios are performing really well, right? And if you go look in the commercial bank, customers are still in really good shape on average, same thing in the corporate investment bank.
On the consumer side, Charlie pointed out a lot of health indicators still look really good. We're not seeing systematic stress. “