Credit quality

The banking giant may be sitting pretty with plenty of money reserved for bad loans — or it could have to set aside billions more in coming quarters. It hinges on an ongoing U.S. recovery and the passage of a new stimulus package.

The company defied expectations by cutting its reserve for loan losses by $569 million, after adding $20 billion to the allowance in the first half.

Deferrals may be hiding credit issues, leading lenders to track deposit flows, property maintenance and other factors to gauge the true health of their portfolios.

Low rates and intense competition might lead some banks to ease underwriting standards in 2021, when the economy may not yet have recovered.

Commercial real estate loans are vulnerable as financial assistance for tenants winds down and might not be fully renewed. Late rent payments could rise, leading lenders to press landlords to pay up.

Originations in the third quarter are on pace to double what the Detroit lender reported a quarter earlier, adding more high-yielding loans to the balance sheet.

The performance of about $3 billion in hotel and other loans flagged by the Dallas company as high-risk has been a "a pleasant surprise," its chief credit officer said at an industry conference.

More consumer and commercial borrowers are paying their loans, increasing the likelihood that charge-offs will be manageable for banks despite the ongoing pandemic.

The St. Louis company is gaining a sizable Small Business Administration platform and several niche deposit teams. Keeping those specialists in the fold will be key to the acquisition's success.

Executives and boards are bracing for elevated loan losses and stagnant revenue, which will mean more conversations about belt tightening as opposed to added investment.