v3.25.2
Allowance for Credit Losses
6 Months Ended
Jun. 30, 2025
Credit Loss [Abstract]  
Allowance for Credit Losses Allowance for Credit Losses
We utilize a minimum of four forward-looking economic scenarios to calculate lifetime ECL when estimating the allowance for credit losses for in scope financial assets and the liability for off-balance sheet credit exposures. Three of the scenarios are termed the "Consensus Economic Scenarios" which include a 'most likely outcome' (the "Central scenario") and two less likely 'outer' scenarios, referred to as the "Upside scenario" and the "Downside scenario." The fourth scenario, referred to as the "Alternative Downside scenario," is designed to consider severe downside risks with more extreme economic outcomes. Each scenario is assigned a weighting deemed appropriate for the estimation of lifetime ECL, with the majority of the weighting typically placed on the Central scenario. At management's discretion, changes may be made to the weighting assigned to the four scenarios or additional scenarios may be included in order to consider current economic conditions.
Updates to Economic Scenarios and Other Changes During the Six Months Ended June 30, 2025 During the first quarter of 2025, economic uncertainty increased due to the potential impacts of new trade and other economic policies in the United States, including tariffs, along with the ongoing uncertainty associated with elevated interest rates and the effects from higher inflation. These factors continued to create economic uncertainty during the second quarter of 2025. We updated our Consensus Economic Scenarios and our Alternative Downside scenario to reflect management's current view of forecasted economic conditions and utilized the four updated scenarios for estimating lifetime ECL at June 30, 2025. Each of the four scenarios were assigned weightings with the majority of the weighting placed on the Central scenario, the second most weighting placed on the Downside scenario, the third most weighting placed on the Upside scenario, and the lowest weighting placed on the Alternative Downside scenario. This weighting was deemed appropriate for the estimation of lifetime ECL under current conditions. The following discussion summarizes the Central, Upside, Downside and Alternative Downside scenarios at June 30, 2025. The economic assumptions described in this section have been formed specifically for the purpose of calculating lifetime ECL.
In the Central scenario, inflation increases in the second half of 2025 driven by tariffs and supply chain disruptions. Amid trade policy uncertainty and slowing momentum, U.S. Gross Domestic Product ("GDP") growth moderates in the second half of 2025 and remains low in 2026 compared with 2024. The FRB resumes reducing its policy rate in the third quarter of 2025 as growth considerations start to outweigh inflation concerns. The unemployment rate remains slightly elevated in 2025 and 2026, while residential housing price growth remains muted. In the financial markets, the growth in financial asset prices moderates in 2025 and 2026 compared with 2024.
In the Upside scenario, the economy grows at a faster pace than in the Central scenario as trade policy uncertainty fades. As a result, the unemployment rate falls and remains lower than in the Central scenario, while both residential housing and commercial real estate prices are higher than in the Central scenario and the equity price index climbs with strong momentum. In this scenario, inflation increases above the Central scenario due to rising commodity prices and employment growth, prompting the FRB to reduce its policy rate more gradually, which drives the 10-year U.S. Treasury yield higher than in the Central scenario.
In the Downside scenario, a higher effective tariff rate drives inflation slightly higher than in the Central scenario. As geopolitical risks escalate, the economy enters a mild recession, with the unemployment rate increasing and remaining at a higher level, while residential housing and commercial real estate prices undergo correction. In this scenario, the FRB raises its policy rate initially in response to higher inflation and the equity price index goes through a substantial correction in 2026 driven by eroding consumer and business sentiments, eventually resulting in lower interest rates than in the Central scenario.
In the Alternative Downside scenario, tariffs escalate globally, geopolitical tensions worsen and trade flows are impacted. Severe inflationary pressures accompanied by tight monetary policy lead the U.S. economy into a deep recession in 2026, followed by a slow recovery. An extended period of economic contraction keeps the unemployment rate at an elevated level, which pressures residential housing prices to depreciate, while at the same time, contracting corporate activities and increased unemployment pushes the commercial real estate market into a downturn. In this scenario, financial markets experience a major sell-off and volatility in the financial markets remains extremely high over the next year. Widening corporate credit spreads and flight to safe-haven assets pushes the 10-year U.S. Treasury yield lower.
The following table presents the forecasted key macroeconomic variables in our Central scenarios used for estimating lifetime ECL at June 30, 2025, March 31, 2025 and December 31, 2024:
For the Quarter Ended
December 31, 2025
June 30, 2026
December 31, 2026
Unemployment rate (quarterly average):
Forecast at June 30, 20254.6 %4.6 %4.5 %
Forecast at March 31, 20254.4 4.5 4.4 
Forecast at December 31, 20244.4 4.3 4.3 
GDP growth rate (year-over-year):
Forecast at June 30, 20251.1 1.6 1.6 
Forecast at March 31, 20251.4 1.9 2.3 
Forecast at December 31, 20241.8 1.6 1.6 
As part of our updates to the economic scenarios, during the six months ended June 30, 2025, we also increased our commercial allowance for credit losses for risk associated with large loan exposures.
In addition to the updates to the economic scenarios, during the three and six months ended June 30, 2025, we increased our commercial allowance for credit losses associated with individually assessed loans due primarily to downgrades, including the downgrade of a large commercial real estate loan in the first quarter. During the three months ended June 30, 2025, we also decreased the management judgement allowance on our commercial loan portfolio for risk factors associated with higher risk exposures that are not fully captured in the models. As current economic forecasts are updated and more adequately reflect the risks associated with the uncertainty in the forward economic outlook and, therefore, they are appropriately captured in the modeled results, we decreased the management judgement allowance associated with these risks.
While we believe that the assumptions used in our credit loss models are reasonable and within the parameters for which the models have been built and calibrated to operate, inflation, elevated interest rates, and new trade and other economic policies in the United States, including tariffs, may adversely impact certain clients, which may not be fully captured by the models. As a result, adjustments to model outputs to reflect consideration of management judgment are used with stringent governance in place to ensure an appropriate lifetime ECL estimate.
The impacts of new trade and other economic policies in the United States, including tariffs, along with elevated interest rates and the effects from higher inflation will continue to evolve and impact our business and our allowance for credit losses in future periods, the extent of which remains uncertain. We will continue to monitor these situations closely and will continue to adapt our approach as necessary to reflect management's current view of forecasted economic conditions.
Allowance for Credit Losses / Liability for Off-Balance Sheet Credit Exposures The following table summarizes our allowance for credit losses and the liability for off-balance sheet credit exposures:
June 30, 2025December 31, 2024
 (in millions)
Allowance for credit losses:
Loans$614 $537 
Securities held-to-maturity(1)
 — 
Other financial assets measured at amortized cost(2)
 — 
Securities available-for-sale(1)
 — 
Total allowance for credit losses$614 $537 
Liability for off-balance sheet credit exposures$158 $139 
(1)See Note 3, "Securities," for additional information regarding the allowance for credit losses associated with our security portfolios.
(2)Primarily includes accrued interest receivables and customer acceptances.
The following table summarizes the changes in the allowance for credit losses on loans by product or line of business during the three and six months ended June 30, 2025 and 2024:
 Commercial LoansConsumer Loans 
Real Estate, including Construction
Business
and Corporate Banking(1)
Other
Comm'l
Residential
Mortgages
Home
Equity
Mortgages
Credit
Cards
Other
Consumer
Total Loans
 (in millions)
Three Months Ended June 30, 2025
Allowance for credit losses – beginning of period
$210 $412 $1 $(11)$5 $13 $4 $634 
Provision charged (credited) to income(3)42  (8)(1) (1)29 
Charge-offs(27)(25)   (2) (54)
Recoveries 1  2 1 1  5 
Net (charge-offs) recoveries(27)(24) 2 1 (1) (49)
Allowance for credit losses – end of period
$180 $430 $1 $(17)$5 $12 $3 $614 
Three Months Ended June 30, 2024
Allowance for credit losses – beginning of period
$134 $428 $$(7)$$15 $$581 
Provision charged (credited) to income11 44 — (1)(2)(1)52 
Charge-offs— (51)— — — (2)— (53)
Recoveries— — — — 
Net (charge-offs) recoveries— (51)— (1)— (50)
Allowance for credit losses – end of period
$145 $421 $$(7)$$13 $$583 
Six Months Ended June 30, 2025
Allowance for credit losses – beginning of period
$144 $381 $1 $(12)$6 $13 $4 $537 
Provision charged (credited) to income63 88  (8)(2)1 (1)141 
Charge-offs(27)(40)   (4) (71)
Recoveries 1  3 1 2  7 
Net (charge-offs) recoveries(27)(39) 3 1 (2) (64)
Allowance for credit losses – end of period
$180 $430 $1 $(17)$5 $12 $3 $614 
Six Months Ended June 30, 2024
Allowance for credit losses – beginning of period
$144 $429 $$(9)$$16 $$591 
Provision charged (credited) to income43 — — (1)(1)— 42 
Charge-offs— (52)— — — (4)— (56)
Recoveries— — — 
Net (charge-offs) recoveries— (51)— (2)— (50)
Allowance for credit losses – end of period
$145 $421 $$(7)$$13 $$583 
(1)In connection with changes to our business segments as discussed further in Note 13, "Business Segments," during the first quarter of 2025, we changed our presentation for what was previously reported as global banking to include such activity within business and corporate banking. As a result, we have reclassified prior year amounts to conform to the current year presentation.
The following table summarizes the changes in the liability for off-balance sheet credit exposures during the three and six months ended June 30, 2025 and 2024:
Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
 (in millions)
Balance at beginning of period$145 $123 $139 $111 
Provision charged (credited) to income13 (5)19 
Balance at end of period$158 $118 $158 $118 
Accrued Interest Receivables The following table summarizes accrued interest receivables associated with financial assets carried at amortized cost and securities available-for-sale along with the related allowance for credit losses, which are reported net in other assets on the consolidated balance sheet. These accrued interest receivables are excluded from the amortized cost basis disclosures presented elsewhere in these financial statements, including Note 3, "Securities," and Note 4, "Loans."
June 30, 2025December 31, 2024
 (in millions)
Accrued interest receivables:
Loans$242 $249 
Securities held-to-maturity70 67 
Other financial assets measured at amortized cost22 25 
Securities available-for-sale171 117 
Total accrued interest receivables505 458 
Allowance for credit losses  — 
Accrued interest receivables, net$505 $458 
During the three and six months ended June 30, 2025 and 2024, charged-off accrued interest receivables were immaterial.