A new report shows that the largest banks in the United States have reported a rapid increase in the number of non-standard, suspicious, and potentially loss-making loans on their balance sheets.
The amount of funds occupied by criticized loans has just reached the highest level since 2020, indicating risks of default and signs of weakness associated with these loans, according to a report by S&P Global.
JPMorgan Chase experienced the largest year-on-year growth, with the number of criticized loans surging by 26.3% to reach $26.01 billion at the end of the third quarter.
Meanwhile, Wells Fargo saw a 17.9% year-on-year increase in criticized loans, reaching $37.6 billion, and Bank of America saw a 15.2% year-on-year increase, reaching $26.06 billion.
This brings the total amount of criticized loans for these three banks to $89.67 billion since the third quarter of 2023, reflecting a trend commonly seen across banks.
“The total amount of criticized loans for public banks in the United States is $279.98 billion, up from $240.37 billion at the end of 2023, and the total amount of such loans for the top 100 public banks in the United States is $260.48 billion, up from $219.82 billion at the end of 2023.”
Among the tier-one banks with assets exceeding $50 billion, four banks saw triple-digit growth in criticized loans.
Flagstar Financial saw a 338.6% year-on-year increase in criticized loans, while First Horizon, Valley National Bancorp, and Webster Financial Corp saw year-on-year increases of 112.2%, 110.1%, and 102.8% respectively.
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