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Allowance for Credit Losses
 12 Months Ended
Dec. 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. The allowance for credit losses generally comprises:
•the allowance for loan losses, which covers the Firm’s retained loan portfolios (scored and risk-rated),
•the allowance for lending-related commitments, which is presented on the Consolidated balance sheets in accounts payable and other liabilities, and
•the allowance for credit losses on investment securities, which is reflected in investment securities on the Consolidated balance sheets.
The income statement effect of all changes in the allowance for credit losses is recognized in the provision for credit losses.
Determining the appropriateness of the allowance for credit losses is complex and requires significant judgment by management about the effect of matters that are inherently uncertain. At least quarterly, the allowance for credit losses is reviewed by the CRO, the CFO and the Controller of the Firm. Subsequent evaluations of credit exposures, considering the macroeconomic conditions, forecasts and other factors then prevailing, may result in significant changes in the allowance for credit losses in future periods.
The Firm’s policies used to determine its allowance for loan losses and its allowance for lending-related commitments are described in the following paragraphs. Refer to Note 10 for a description of the policies used to determine the allowance for credit losses on investment securities.
Methodology for allowances for loan losses and lending-related commitments
The allowance for loan losses and allowance for lending-related commitments represents expected credit losses over the remaining expected life of retained loans and lending-related commitments that are not unconditionally cancellable. The Firm does not record an allowance for future draws on unconditionally cancellable lending-related commitments (e.g., credit cards). Expected losses related to accrued interest on credit card loans are considered in the Firm’s allowance for loan losses. However, the Firm does not record an allowance on other accrued interest receivables, due to its policy to write these receivables off no later than 90 days past due by reversing interest income.
The expected life of each instrument is determined by considering its contractual term, expected prepayments, cancellation features, and certain extension and call options. The expected life of funded credit card loans is generally estimated by considering expected future payments on the credit card account, and determining how much of those amounts should be allocated to repayments of the funded loan balance (as of the balance sheet date) versus other account activity. This allocation is made using
an approach that incorporates the payment application requirements of the Credit Card Accountability Responsibility and Disclosure Act of 2009, generally paying down the highest interest rate balances first.
The estimate of expected credit losses includes expected recoveries of amounts previously charged off or expected to be charged off, even if such recoveries result in a negative allowance.
Collective and Individual Assessments
When calculating the allowance for loan losses and the allowance for lending-related commitments, the Firm assesses whether exposures share similar risk characteristics. If similar risk characteristics exist, the Firm estimates expected credit losses collectively, considering the risk associated with a particular pool and the probability that the exposures within the pool will deteriorate or default. The assessment of risk characteristics is subject to significant management judgment. Emphasizing one characteristic over another or considering additional characteristics could affect the allowance.
•Relevant risk characteristics for the consumer portfolio include product type, delinquency status, current FICO scores, geographic distribution, and, for collateralized loans, current LTV ratios.
•Relevant risk characteristics for the wholesale portfolio include risk rating, delinquency status, tenor, level and type of collateral, LOB, geography, industry, credit enhancement, product type, facility purpose, and payment terms.
The majority of the Firm’s credit exposures share risk characteristics with other similar exposures, and as a result are collectively assessed for impairment (“portfolio-based component”). The portfolio-based component covers consumer loans, performing risk-rated loans and certain lending-related commitments.
If an exposure does not share risk characteristics with other exposures, the Firm generally estimates expected credit losses on an individual basis, considering expected repayment and conditions impacting that individual exposure (“asset-specific component”). The asset-specific component covers collateral-dependent loans and risk-rated loans that have been placed on nonaccrual status.
Portfolio-based component
The portfolio-based component begins with a quantitative calculation that considers the likelihood of the borrower changing delinquency status or moving from one risk rating to another. The quantitative calculation covers expected credit losses over an instrument’s expected life and is estimated by applying credit loss factors to the Firm’s estimated exposure at default. The credit loss factors incorporate the probability of borrower default as well as loss severity in the event of default. They are derived using a weighted average of five internally developed macroeconomic scenarios over an eight-quarter forecast period, followed by a single year straight-line interpolation
to revert to long run historical information for periods beyond the eight-quarter forecast period. The five macroeconomic scenarios consist of a central, relative adverse, extreme adverse, relative upside and extreme upside scenario, and are updated by the Firm’s central forecasting team. The scenarios take into consideration the Firm’s macroeconomic outlook, internal perspectives from subject matter experts across the Firm, and market consensus and involve a governed process that incorporates feedback from senior management across LOBs, Corporate Finance and Risk Management.
The quantitative calculation is adjusted to take into consideration model imprecision, emerging risk assessments, trends and other subjective factors that are not yet reflected in the calculation. These adjustments are accomplished in part by analyzing the historical loss experience, including during stressed periods, for each major product or model. Management applies judgment in making this adjustment, including taking into account uncertainties associated with the economic and political conditions, quality of underwriting standards, borrower behavior, credit concentrations or deterioration within an industry, product or portfolio, as well as other relevant internal and external factors affecting the credit quality of the portfolio. In certain instances, the interrelationships between these factors create further uncertainties.
The application of different inputs into the quantitative calculation, and the assumptions used by management to adjust the quantitative calculation, are subject to significant management judgment, and emphasizing one input or assumption over another, or considering other inputs or assumptions, could affect the estimate of the allowance for loan losses and the allowance for lending-related commitments.
Asset-specific component
To determine the asset-specific component of the allowance, collateral-dependent loans (including those loans for which foreclosure is probable) and nonaccrual risk-rated loans in the wholesale portfolio segment are generally evaluated individually.
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 discounted cash flow (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. The adoption did not impact the collateral-dependent allowance approach or scope.
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.
For collateral-dependent loans, the fair value of collateral less estimated costs to sell, as applicable, is used to determine the charge-off amount for declines in value (to reduce the amortized cost of the loan to the fair value of collateral) or the amount of negative allowance that should be recognized (for recoveries of prior charge-offs associated with improvements in the fair value of the collateral).
For non-collateral dependent loans, the Firm generally measures the asset-specific allowance as the difference between the amortized cost of the loan and the present value of the cash flows expected to be collected, discounted at the loan’s effective interest rate. Subsequent changes in impairment are generally recognized as an adjustment to the allowance for loan losses. The asset-specific component of the allowance for non-collateral dependent loans incorporates the effect of the modification on the loan’s expected cash flows including changes in interest rates, principal forgiveness, and other concessions, as well as management’s expectation of the borrower’s ability to repay under the modified terms.
Estimating the timing and amounts of future cash flows is highly judgmental as these cash flow projections rely upon estimates such as loss severities, asset valuations, the amounts and timing of interest or principal payments (including any expected prepayments) or other factors that are reflective of current and expected market conditions. These estimates are, in turn, dependent on factors such as the duration of current overall economic conditions, industry, portfolio, or borrower-specific factors, the expected outcome of insolvency proceedings as well as, in certain circumstances, other economic factors. All of these estimates and assumptions require significant management judgment and certain assumptions are highly subjective.
Other financial assets
In addition to loans and investment securities, the Firm holds other financial assets that are measured at amortized cost on the Consolidated balance sheets, including credit exposures arising from lending activities subject to collateral maintenance requirements. Management estimates the allowance for other financial assets using various techniques considering historical losses and current economic conditions.
Credit risk arising from lending activities subject to collateral maintenance requirements is generally mitigated by factors such as the short-term nature of the activity, the
fair value of collateral held and the Firm’s right to call for, and the borrower’s obligation to provide additional margin when the fair value of the collateral declines. Because of these mitigating factors, these exposures generally do not require an allowance for credit losses. However, management may also consider other factors such as the borrower’s ongoing ability to provide collateral to satisfy margin requirements, or whether collateral is significantly concentrated in an individual issuer or in securities with similar risk characteristics. If in management’s judgment, an allowance for credit losses for these exposures is required, the Firm estimates expected credit losses based on the value of the collateral and probability of borrower default.

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 for further information on the allowance for credit losses on investment securities.
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2023
Year ended December 31,
(in millions)		Consumer,
excluding
credit card		Credit cardWholesaleTotal
Allowance for loan losses
Beginning balance at January 1,$2,040 $11,200 $6,486 $19,726 
Cumulative effect of a change in accounting principle(a)
(489)(100)2 (587)
Gross charge-offs1,151 

5,491 1,011 7,653 
Gross recoveries collected(519)(793)(132)(1,444)
Net charge-offs632 

4,698 879 6,209 
Provision for loan losses936 6,048 2,484 9,468 
Other
1 

— 21 22 
Ending balance at December 31,$1,856 $12,450 $8,114 $22,420 
Allowance for lending-related commitments
Beginning balance at January 1,
$76 $— $2,306 $2,382 
Cumulative effect of a change in accounting principle(a)
— NA— NA
Provision for lending-related commitments
(1)— (407)(408)
Other
— — — — 
Ending balance at December 31,$75 $— $1,899 $1,974 
Total allowance for investment securitiesNANANA$128 
Total allowance for credit losses(b)(c)
$1,931 $12,450 $10,013 $24,522 
Allowance for loan losses by impairment methodology
Asset-specific(d)
$(876)$— $392 $(484)
Portfolio-based2,732 12,450 7,722 22,904 
Total allowance for loan losses$1,856 $12,450 $8,114 $22,420 
Loans by impairment methodology
Asset-specific(d)
$3,287 $— $2,338 $5,625 
Portfolio-based393,988 211,123 670,134 1,275,245 
Total retained loans$397,275 $211,123 $672,472 $1,280,870 
Collateral-dependent loans
Net charge-offs$6 

$— $180 $186 
Loans measured at fair value of collateral less cost to sell
3,216 — 1,012 4,228 
Allowance for lending-related commitments by impairment methodology
Asset-specific
$— $— $89 $89 
Portfolio-based75 — 1,810 1,885 
Total allowance for lending-related commitments(e)
$75 $— $1,899 $1,974 
Lending-related commitments by impairment methodology
Asset-specific
$— $— $464 $464 
Portfolio-based(f)
28,248 — 516,577 544,825 
Total lending-related commitments
$28,248 $— $517,041 $545,289 
(a)Represents the impact to the allowance for loan losses upon the adoption of the Financial Instruments - Credit Losses: Troubled Debt Restructurings accounting guidance. Refer to Note 1 for further information.
(b)At December 31, 2023 and 2022, in addition to the allowance for credit losses in the table above, the Firm also had an allowance for credit losses of $243 million and $21 million, respectively, associated with certain accounts receivable in CIB.
(c)As of December 31, 2023, included the allowance for credit losses associated with First Republic.
(d)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.
(e)The allowance for lending-related commitments is reported in accounts payable and other liabilities on the Consolidated balance sheets.
(f)At December 31, 2023, 2022 and 2021, lending-related commitments excluded $17.2 billion, $13.1 billion and $15.7 billion, respectively, for the consumer, excluding credit card portfolio segment; $915.7 billion, $821.3 billion and $730.5 billion, respectively, for the credit card portfolio segment; and $19.7 billion, $9.8 billion and $32.1 billion, respectively, for the wholesale portfolio segment, which were not subject to the allowance for lending-related commitments.
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20222021
Consumer,
excluding
credit card		Credit cardWholesaleTotalConsumer,
excluding
credit card		Credit cardWholesaleTotal
$1,765 $10,250 $4,371 $16,386 $3,636 $17,800 $6,892 $28,328 
NANANANANANANANA
812 3,192 322 4,326 630 3,651 283 4,564 
(543)(789)(141)(1,473)(619)(939)(141)(1,699)
269 2,403 181 2,853 11 2,712 142 2,865 
543 3,353 2,293 6,189 (1,858)(4,838)(2,375)(9,071)
1 — 3 4 (2)— (4)(6)
$2,040 $11,200 $6,486 $19,726 $1,765 $10,250 $4,371 $16,386 
$113 $— $2,148 $2,261 $187 $— $2,222 $2,409 
NANANANANANANANA
(37)— 157 120 (75)— (74)(149)
— — 1 1 1 — — 1 
$76 $— $2,306 $2,382 $113 $— $2,148 $2,261 
NANANA$96NANANA$42 
$2,116 $11,200 $8,792 $22,204 $1,878 $10,250 $6,519 $18,689 
$(624)$223 $467 $66 $(665)$313 $263 $(89)
2,664 10,977 6,019 19,660 2,430 9,937 4,108 16,475 
$2,040 $11,200 $6,486 $19,726 $1,765 $10,250 $4,371 $16,386 
$11,978 $796 $2,189 $14,963 $13,919 $987 $2,255 $17,161 
288,775 184,379 601,481 1,074,635 281,637 153,309 558,099 993,045 
$300,753 $185,175 $603,670 $1,089,598 $295,556 $154,296 $560,354 $1,010,206 
$(33)$— $16 $(17)$33 $— $38 $71 
3,585 — 464 4,049 4,472 — 617 5,089 
$— $— $90 $90 $— $— $167 $167 
76 — 2,216 2,292 113 — 1,981 2,094 
$76 $— $2,306 $2,382 $113 $— $2,148 $2,261 
$— $— $455 $455 $— $— $764 $764 
20,423 — 461,688 

482,111 29,588 — 453,571 483,159 
$20,423 $— $462,143 $482,566 $29,588 $— $454,335 $483,923 
Discussion of changes in the allowance
The allowance for credit losses as of December 31, 2023 was $24.8 billion, reflecting a net addition of $3.1 billion from December 31, 2022.
The net addition to the allowance for credit losses included $1.9 billion, consisting of:
•$1.3 billion in consumer, predominantly driven by CCB, comprised of $1.4 billion in Card Services, partially offset by a net reduction of $200 million in Home Lending. The net addition in Card Services was driven by loan growth, including an increase in revolving balances, partially offset by reduced borrower uncertainty. The net reduction in Home Lending was driven by improvements in the outlook for home prices, and
•$675 million in wholesale, driven by net downgrade activity, the net effect of changes in the Firm’s weighted average macroeconomic outlook, including deterioration in the outlook for commercial real estate in CB, and an addition for certain accounts receivable in CIB, partially offset by the impact of changes in the loan and lending-related commitment portfolios.
The net addition also included $1.2 billion to establish the allowance for the First Republic loans and lending-related commitments in the second quarter of 2023.
The changes in the Firm's weighted average macroeconomic outlook also included updates to the central scenario in the third quarter of 2023 to reflect a lower forecasted unemployment rate consistent with a higher growth rate in GDP, and the impact of the additional weight placed on the adverse scenarios in the first quarter of 2023, reflecting elevated recession risks due to high inflation and tightening financial conditions.
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 on January 1, 2023. 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 5.5% in the fourth quarter of 2024, and a weighted average U.S. real GDP level that is 1.5% lower than the central case at the end of the second quarter of 2025.
The following table presents the Firm’s central case assumptions for the periods presented:
Central case assumptions
at December 31, 2023
2Q244Q242Q25
U.S. unemployment rate(a)
4.1 %4.4 %4.1 %
YoY growth in U.S. real GDP(b)
1.8 %0.7 %1.0 %
Central case 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 Critical Accounting Estimates Used by the Firm on pages 155–158 for further information on the allowance for credit losses and related management judgments.
Refer to Consumer Credit Portfolio on pages 114–119, Wholesale Credit Portfolio on pages 120–130 for additional information on the consumer and wholesale credit portfolios.