WSJ reports banks are making fewer loans, despite TARP injections.
Ten of the 13 big beneficiaries of the Treasury Department's Troubled Asset Relief Program, or TARP, saw their outstanding loan balances decline by a total of about $46 billion, or 1.4%, between the third and fourth quarters of 2008.
This tendency was noted on JP Morgan (JPM) and Bank of America’s (BAC) earnings calls (See JPM’s Q408 call and BofA’s Q408 call). WSJ noted that U.S. Bancorp (USB) was one of the few to increase loans. Bespoke Investment referred to USB as one of Warren Buffett’s growing list of headaches. Yet on USB’s Q408 conference call the bank reiterated that it is the highest rated large U.S. bank:
We now are alone as the most highly rated bank of our large bank peer group with a AA rating and a stable outlook with S&P with an AA2 and stable outlook with Moody’s.
A look at USB's lending patterns, from U.S. Bancorp's Q408 conference call:
We experienced exceptional growth in average total deposits this quarter. Average total deposits excluding acquisitions increased by $12 billion, 9.6% over the same quarter of last year and $5.8 billion or 17.2% annualized on a linked quarter basis.
During the fourth quarter, U.S. Bank originated over $16 billion in new loans to businesses and consumers including over $3 billion of consumer loans, over $8 billion of residential mortgages, over $1 billion of loans to small businesses and well over $3 billion of commercial and commercial real estate loans.
Mortgage originations up:
Mortgage production of $8.1 billion was higher than both the same quarter of 2007 and the prior quarter the majority of which was packaged and sold in to the secondary market. As many of you are aware, mortgage originations are up substantially in 2009 with the drop in interest rates and we expect our mortgage originations to continue to accommodate the increased demand from both new and existing customers.
Autos, See also here:
On a linked quarter basis we saw $3 million improvement in the total amount of losses from retail auto leases. We continue to carefully manage the residual risk on this portfolio. Given the current market for used cars we expect adverse market pressure on auto lease residual values to continue in 2009 but overall losses will be manageable as the number of vehicles coming off lease declines.
USB has Visa Corp. (V) ties and expects growing credit card losses:
Q: Potentially with the unemployment level perhaps exceeding 8% in the near term, your loss rate is over 5% now. Conceptually, and again a big part of your loss coming through in the card portfolio. Can that conceptually go over 6%?
A: In Q4 we are at 5.18% on credit cards. We are going to forecast that to be slightly over 6-6.5% at the end of this year or a year from today as we are talking back on quarter four. We are not talking 7-8 but we aren’t talking in the 5’s. We see it continuing to atrophy to something more like 100-125 basis points from where it is.
Commercial real estate:
Nonperforming assets increased by $489 million or 32.8%... The majority of the increase in the core bank portfolio was related to residential construction, residential mortgages and related industries. However, the economic slow down also had an impact on some of our commercial and retail customers.
I think in 2009 we will have a fairly steady amount of losses in commercial real estate attributed to just more traditional commercial real estate across our national footprint.
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