XML 37 R20.htm IDEA: XBRL DOCUMENT v3.23.1
Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2023
Credit Loss [Abstract]  
Allowance for Credit Losses Allowance for credit losses
The Firm's allowance for credit losses represents management's estimate of expected credit losses over the remaining expected life of the Firm's financial assets measured at amortized cost and certain off-balance sheet lending-related commitments.
On January 1, 2023 the Firm adopted the Financial Instruments - Credit Losses: Troubled Debt Restructurings accounting guidance as described in Note 1.
The adoption of this guidance eliminated the requirement to measure the allowance for TDRs using a DCF methodology and allowed the option of a non-DCF portfolio-based approach for modified loans to borrowers experiencing financial difficulty. If a DCF methodology is still applied for these modified loans, the discount rate must be the post-modification effective interest rate, instead of the pre-modification effective interest rate.
The Firm elected to change from an asset-specific allowance approach to its non-DCF, portfolio-based allowance approach for modified loans to troubled borrowers for all portfolios except collateral-dependent loans and nonaccrual risk-rated loans, for which the asset-specific allowance approach will continue to apply.
This guidance was adopted under the modified retrospective method which resulted in a net decrease to the allowance for credit losses of $587 million and an increase to retained earnings of $446 million, after-tax predominantly driven by residential real estate and credit card.
Refer to Note 13 of JPMorgan Chase's 2022 Form 10-K for a detailed discussion of the allowance for credit losses and the related accounting policies.
Allowance for credit losses and related information
The table below summarizes information about the allowances for credit losses and includes a breakdown of loans and lending-related commitments by impairment methodology. Refer to Note 10 of JPMorgan Chase’s 2022 Form 10-K and Note 9 of this Form 10-Q for further information on the allowance for credit losses on investment securities.
2023
2022
Three months ended March 31,
(in millions)		Consumer, excluding
credit card		Credit cardWholesaleTotalConsumer, excluding credit cardCredit cardWholesaleTotal
Allowance for loan losses
Beginning balance at January 1,$2,040 $11,200 $6,486 $19,726 $1,765 $10,250 $4,371 $16,386 
Cumulative effect of a change in accounting principle(a)
(489)(100)2 (587)NANANANA
Gross charge-offs235 1,111 105 1,451 204 720 52 976 
Gross recoveries collected(103)(189)(22)(314)(158)(214)(22)(394)
Net charge-offs/(recoveries)132 922 83 1,137 46 506 30 582 
Provision for loan losses247 1,222 578 2,047 175 506 687 1,368 
Other
— — 4 4 — — 20 20 
Ending balance at March 31,$1,666 $11,400 $6,987 $20,053 $1,894 $10,250 $5,048 $17,192 
Allowance for lending-related commitments
Beginning balance at January 1,
$76 $— $2,306 $2,382 $113 $— $2,148 $2,261 
Provision for lending-related commitments
1 — (14)(13)(2)— 98 96 
Other
— — 1 1 — — 1 1 
Ending balance at March 31$77 $— $2,293 $2,370 $111 $— $2,247 $2,358 
Total allowance for investment securitiesNANANA90 NANANA41 
Total allowance for credit losses(b)
$1,743 $11,400 $9,280 $22,513 $2,005 $10,250 $7,295 $19,591 
Allowance for loan losses by impairment methodology
Asset-specific(c)
$(1,030)$— $437 $(593)$(644)$262 $485 $103 
Portfolio-based2,696 11,400 6,550 20,646 2,538 9,988 4,563 17,089 
Total allowance for loan losses$1,666 $11,400 $6,987 $20,053 $1,894 $10,250 $5,048 $17,192 
Loans by impairment methodology
Asset-specific(c)
$3,560 $— $2,189 $5,749 $13,186 $901 $2,823 $16,910 
Portfolio-based296,887 180,079 602,135 1,079,101 282,975 151,382 567,130 1,001,487 
Total retained loans$300,447 $180,079 $604,324 $1,084,850 $296,161 $152,283 $569,953 $1,018,397 
Collateral-dependent loans
Net charge-offs$4 $— $18 $22 $(5)$— $7 $2 
Loans measured at fair value of collateral less cost to sell
3,539 — 586 4,125 4,144 — 665 4,809 
Allowance for lending-related commitments by impairment methodology
Asset-specific
$— $— $45 $45 $— $— $139 $139 
Portfolio-based
77 — 2,248 2,325 111 — 2,108 2,219 
Total allowance for lending-related commitments(d)
$77 $— $2,293 $2,370 $111 $— $2,247 $2,358 
Lending-related commitments by impairment methodology
Asset-specific
$— $— $401 $401 $— $— $767 $767 
Portfolio-based(e)
21,569 — 466,600 488,169 31,847 — 463,570 495,417 
Total lending-related commitments
$21,569 $— $467,001 $488,570 $31,847 $— $464,337 $496,184 
(a)Represents the impact to the allowance for loan losses upon the adoption of the Financial Instruments - Credit Losses: Troubled Debt Restructurings accounting guidance.
(b)At March 31, 2023, in addition to the allowance for credit losses in the table above, the Firm also had an allowance for credit losses of $241 million associated with Other assets in Corporate and $20 million associated with certain accounts receivable in CIB.
(c)Includes collateral-dependent loans, including those for which foreclosure is deemed probable, and nonaccrual risk-rated loans for all periods presented. Prior periods also include non collateral-dependent TDRs or reasonably expected TDRs and modified PCD loans.
(d)The allowance for lending-related commitments is reported in accounts payable and other liabilities on the Consolidated balance sheets.
(e)At March 31, 2023 and 2022, lending-related commitments excluded $16.0 billion and $15.3 billion, respectively, for the consumer, excluding credit card portfolio segment; $861.2 billion and $757.3 billion, respectively, for the credit card portfolio segment; and $17.5 billion and $32.9 billion, respectively, for the wholesale portfolio segment, which were not subject to the allowance for lending-related commitments.
Discussion of changes in the allowance
The allowance for credit losses as of March 31, 2023 was $22.8 billion, reflecting a net addition of $1.1 billion from December 31, 2022. The net addition to the allowance for credit losses was predominantly driven by a deterioration in the Firm's weighted-average economic outlook, including the impact from changes to the Firm’s macroeconomic scenarios, and the additional weight placed on the relative adverse scenario. The additional weight placed on the relative adverse scenario reflects an increased probability of a moderate recession due to tightening financial conditions, including higher inflation, changes in monetary policy, and geopolitical risks.
The net addition to the allowance consisted of:
•$726 million in wholesale, which also reflected net downgrade activity, and an addition to the allowance for credit losses associated with Other assets in Corporate, and
•$416 million in consumer.
The allowance for credit losses also reflected a reduction of $587 million as a result of the adoption of changes to the TDR accounting guidance. Refer to Note 1 for further information.
The Firm's allowance for credit losses is estimated using a weighted average of five internally developed macroeconomic scenarios. The adverse scenarios incorporate more punitive macroeconomic factors than the central case assumptions provided in the table below, resulting in a weighted average U.S. unemployment rate peaking at 5.8% in the third quarter of 2024, and a 1.2% lower U.S. real GDP exiting the second quarter of 2024.
The Firm’s central case assumptions reflected U.S. unemployment rates and U.S. real GDP as follows:
Assumptions at March 31, 2023
2Q234Q232Q24
U.S. unemployment rate(a)
3.5 %4.1 %4.9 %
YoY growth in U.S. real GDP(b)
2.0 %0.4 %— %
Assumptions at December 31, 2022
2Q234Q232Q24
U.S. unemployment rate(a)
3.8 %4.3 %5.0 %
YoY growth in U.S. real GDP(b)
1.5 %0.4 %— %
(a)Reflects quarterly average of forecasted U.S. unemployment rate.
(b)The year over year growth in U.S. real GDP in the forecast horizon of the central scenario is calculated as the percentage change in U.S. real GDP levels from the prior year.
Subsequent changes to this forecast and related estimates will be reflected in the provision for credit losses in future periods.
Refer to Note 13 and Note 10 of JPMorgan Chase’s 2022 Form 10-K for a description of the policies, methodologies and judgments used to determine the Firm’s allowances for credit losses on loans, lending-related commitments, and investment securities.
Refer to Consumer Credit Portfolio on pages 50-53, Wholesale Credit Portfolio on pages 54-62 and Note 11 for additional information on the consumer and wholesale credit portfolios.
Refer to Critical Accounting Estimates Used by the Firm on pages 74-76 for further information on the allowance for credit losses and related management judgments.