Major U.S. banks—including JPMorgan Chase, Bank of America, and Citigroup—have issued cautionary signals in their Q1 earnings reports, highlighting a plateau in credit demand that may foreshadow a broader economic slowdown. While employment remains strong, the institutions flagged concern around consumer fatigue and uncertainty, particularly in light of rising tariff pressures.
According to Federal Reserve data derived from the banks, credit card usage has slowed significantly, and delinquencies have edged up. JPMorgan reported a 30+ day credit card delinquency rate of 2.23%—up from 2.14% in Q4 2023 and 1.68% a year earlier. Wells Fargo, meanwhile, saw its delinquency rate rise from 2.80% to 2.92% over the same period, while Citi recorded a modest decline to 1.01%, though still higher than in 2023.
Banks also noted a softening in lending activity. In Q1, corporate loan applications decelerated sharply, especially among mid-sized firms—suggesting trepidation around uncertainty tied to tariffs and global trade disruptions . The Federal Reserve’s quarterly Senior Loan Officer Opinion Survey (SLOOS) corroborates this trend, showing the weakest demand for commercial and industrial loans in a year and the most pronounced drop in credit card loan interest since Q2 2020.
Despite these signs, banks reported that consumer credit remained relatively stable overall. In fact, consumer spending supported earnings, with JPMorgan and Bank of America seeing credit and debit card usage rise 7% and 4% year-over-year, respectively, even as lenders set aside larger loss provisions for potential delinquencies . Bank executives emphasized that while credit card delinquencies are rising, they have not yet triggered systemic distress.
However, the divergence between healthy employment figures and weakening credit demand presents a troubling signal. Analysts point to the tightening of lending standards—especially mortgages and credit cards—as evidence of growing caution in the financial system. Approximately 17% of banks nationwide reported weaker demand for credit cards, and about 12.5% tightened lending standards for commercial and industrial loans.
Banks have also increased reserves to buffer potential losses. JPMorgan allocated $3.31 billion for Q1 credit loss provisions—roughly $556 million above estimates. Collectively, the four largest banks expect to set aside nearly $35 billion by the end of the year. These steps reflect a preventive stance amid macroeconomic uncertainty and rising interest rates.
Economic sentiment remains fragile. While hard data like low unemployment (around 4.1–4.2%) and steady consumer spending suggest resilience, soft indicators—such as reduced loan demand—signal growing caution. The firms echoed investor concerns that unpredictable tariff policies could stifle both consumer and business confidence .
Analysts caution that a sustained contraction in credit activity—from both supply and demand sides—has historically preceded recessions. The sharp drop in business loan applications and the slowing momentum in consumer lending echo these warning signs .
In summary, while broad economic indicators like employment and spending remain positive, early warning signs in the credit sector—slowing loan demand, rising delinquencies, and tighter lending standards—suggest underlying strains. The banking sector’s cautious posture and rising provisions underscore the need for close monitoring of credit conditions in the months ahead.
