The provision for credit losses reflected a benefit of $283 million, compared with provision expense of $646 million in the prior year. The current-quarter provision reflected a $700 million reduction in the allowance for loan losses due to improved delinquency trends and lower estimated losses, primarily in the home equity portfolio. Net charge-offs totaled $417 million. Home equity net charge-offs were $257 million (1.49% net charge-off rate 1), compared with $579 million (2.90% net charge-off rate 1) in the prior year. Subprime mortgage net charge-offs were $92 million (4.35% net charge-off rate 1), compared with $143 million (5.74% net charge-off rate 1). Prime mortgage, including option ARMs, net charge-offs were $66 million (0.63% net charge-off rate 1), compared with $151 million (1.33% net charge-off rate 1).
Nonaccrual loans were $7.9 billion, compared with $5.9 billion in the prior year and $8.1 billion in the prior quarter. The current-quarter and prior-quarter nonaccrual loans reflected the effect of regulatory guidance implemented in the third and first quarters of 2012 as a result of which the Firm began reporting Chapter 7 loans and performing junior liens that are subordinate to nonaccrual senior liens as nonaccrual loans. For more information, see the Consumer Credit Portfolio section of the Firm’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012. Excluding the impact of the regulatory guidance noted above, nonaccrual loans would have been $4.9 billion in the fourth quarter, down from $5.9 billion in the prior year.
Noninterest expense was $436 million, up by $4 million from the prior year.
Key Metrics and Business Updates: (All comparisons refer to the prior-year quarter except as noted. Average loans include PCI loans)
- Average home equity loans were $89.7 billion, down $12.3 billion.
- Average mortgage loans were $89.1 billion, down $9.1 billion.
- Allowance for loan losses was $10.6 billion, compared with $14.4 billion.
- Allowance for loan losses to ending loans retained, excluding PCI loans, was 4.14%, compared with 6.58%.
Card, Merchant Services & Auto net income was $840 million, a decrease of $211 million, or 20%, compared with the prior year. The decrease was driven by higher provision for credit losses and higher noninterest expense.Net revenue was $4.8 billion, flat compared with the prior year. Net interest income was $3.5 billion, down $45 million, or 1%, from the prior year. The decrease was driven by lower average credit card loan balances and narrower auto loan spreads. These decreases were offset by lower revenue reversals associated with lower net charge-offs in credit card and lower funding costs. Noninterest revenue was $1.3 billion, an increase of $39 million, or 3%, from the prior year. The increase was driven by higher net interchange and merchant servicing revenue, partially offset by higher amortization of loan origination costs.