Regional banks remain cautious about releasing loan-loss reserves, even as some of their counterparts have already started to trim allowances in response to government stimulus efforts and rapid progress in the rollout of the coronavirus vaccine.
Citizens Financial Group, M&T Bank and Huntington Bancshares — whose combined allowance for loan losses totaled $6.3 billion at the end of 2020, nearly double the amount from the prior year — aren’t yet ready to say for sure when they will begin releasing reserves set aside during the pandemic recession to cover potential loan losses. During a virtual industry conference Wednesday, executives from all three companies said they continue to monitor the economy for signs that recovery is underway.
“There’s still a lot of uncertainty out there,” M&T Chief Financial Officer Darren King said during the conference, which was hosted by RBC Capital Markets. The Buffalo, N.Y., company moved about $500 million of loans, mostly leisure- and hospitality-related, into nonaccrual status in the fourth quarter and while hotel and event bookings have picked up, hotel stays ar4en't expected to pick up until later in the year, King said.
Until those bookings show up in revenue and net operating income, "it would be a little bit premature to take action on that,” he said. “So we’ve got some portfolios where you can see the strength and improvements, but other ones where we’re still not quite there yet.”
Banks added billions of dollars to their loss reserves last year in anticipation of waves of soured loans. Loss provisioning ramped up in the second quarter when lockdowns ground the economy to a halt, but by the third quarter some banks began to
The nation’s four largest banks — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo —
Meanwhile, Huntington added $130 million in provisions for the fourth quarter. Now, amid the vaccine rollout and some optimism about the recovery, the Columbus, Ohio, company expects to start drawing down its reserves over the course of this year, CFO Zach Wasserman said Wednesday.
“I can’t say with precision what that trajectory is,” he said. “My expectation is as we go throughout the course of 2021, you’ll see a return to the beginning of moving back to pre-COVID levels of reserves.”
The message from Providence, R.I.-based Citizens was similar. While some consumer and commercial retail credit trends “are very positive,” the company is keeping a close eye on retail, hospitality, casual dining and energy, CFO John Woods said. A decision about first-quarter provisions will be made soon, he added.
