7 Reasons Banks’ Pain Isn’t Over Yet
May 6th, 2009 | By Contrarian Profits | Category: Notes From the Investment UndergroundEven if Ben Bernanke is right about the stress tests truly reflecting the “financial conditions” of the banks, it doesn’t matter much. Banks themselves are still worried that they won’t get paid back on old loans.
The latest Federal Reserve survey of senior loan officers finds very few shoots of green in that garden. According to the survey, “A significant majority of banks reported that credit quality for all types of loans is likely to deteriorate over the year.” And this assumes the economy won’t get any worse than it already is now! Here are some specifics (hat tip, Real Time Economics)
Commercial and industrial loans: Of 52 banks responding, none said they expect improving quality, but seven said they expect delinquencies and charge offs to stabilize at current levels.
Commercial real-estate loans: Only 1 of 51 banks (the other doesn’t make such loans) sees improving quality, and three see quality stabilizing at current levels. Of the 47 who see a worsening picture, 13 expected a substantial deterioration in 2009.
Prime residential mortgages: Only 1 of 50 banks sees improving quality, and seven see quality stabilizing at current levels.
Subprime mortgages: No bank sees improving quality, and only two see quality stabilizing at current levels.
Home equity lines: No bank sees improving quality, though nine expect quality to stabilize around current levels.
Credit card loans: None of the 31 banks who make such loans expects improvement, and three expect stabilization.
Other consumer loans: Only one of 50 banks expects improvement, though 12 see loan quality stabilizing around current levels.
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