S&P Global Ratings anticipates further additions to U.S. banks' credit loss allowances in the coming quarters, after only small increases between fourth-quarter 2024 and first-quarter 2025, according to a new report.

In S&P's baseline forecast, they project the industry's allowance-to-loans ratio and provisions will rise about 5 basis points and roughly 10%-15% respectively in 2025, reflecting an economic slowdown, but s&P still assumes an industry return on equity of 10.0%-11.0%.

If the U.S. enters a mild to moderate recession amid tariff uncertainty, S&P thinks bank allowances and provisions would rise above these levels but the profitability decline should be manageable.

In a more severe recession, some banks' earnings could be hit harder than others, resulting in potential negative rating actions.

The full report: "Are U.S. Banks Recession Ready?", details bank performance under four recession scenarios and is available on RatingsDirect.

This report does not constitute a rating action.