Worst of Credit Storms Is Over for U.S. Banks - Fitch

Fitch Ratings suggests the worst of the credit crisis is over for US commercial banks, though there is still some clean-up to be done.

In its Quarterly Review of the 30 largest US banks, Fitch gives the credit crisis a meteorological workout:

The long dreaded, broad-based deterioration in consumer asset quality escalated during 2Q08 like the sudden movement of a tropical storm. Much like weather forecasts and storm warnings, no matter how many dire predictions before the storm, the reality of the storm’s destruction and devastation always seems to take everyone by surprise. In common with the high winds at the leading edge of the storm; loan loss provisions do  the most damage and make the most noise. Similarly the increases in non-performing loans and net charge-offs are much like the collateral damage that takes months and,  in some cases, years to fully clean up and rebuild.

That said, one silver lining is that the infrastructure constructed after a natural disaster is typically built stronger and more durable. The real question is whether the U.S. banks are weathering the trailing edge winds or merely getting ready for the eye of the storm.

Fitch believes that while this storm lingered over land longer and did more damage than the storm chasers initially thought, it appears that the winds may be dying down.

Looking beyond 3Q08, the banks clearly face the arduous task of cleaning up the mess, which could take a while. To be sure, there will be the occasional gust and perhaps meaningful levels of rain still to come but it is no longer a Category 5.

Comments

[texalope:]

My prediction; This will draw a lot of derisive comments from the readers at Calculated Risk, the blog that should be named the MOTHER OF DARKNESS

2008 Sep 02 05:01 PM

[whidbey:]

Excuse me, but is this a report of Fitch's hopes are expectations? Poppycock is the only polite term for such airings. Z

2008 Sep 02 05:10 PM

[John C. Lee:]

Since when did people trust rating agencies now? They totally screwed up for years.

2008 Sep 02 05:35 PM

[surgcare:]

How can anyone predict recovery of the financials when their borrowing billions daily just to stay afloat , not to mention noboby knows what they'll be worth in a year or more .

2008 Sep 02 08:29 PM

[buyitcheap:]

BAHAHAHAHAHAHAHAHA!!! ROFLMAO!!!

Most of those assets are CLINGING to level 2, and before they slide into mark to magic, or worse, an actual market value, dozens of banks will have merged, bought or be under FDIC management.

I suppose Fitch is going to upgrade FNM and FRE to a buy too because they're "up 20%" from their lows?

2008 Sep 02 09:07 PM

[paper200:]

Anybody knows the authors of the Fitch report - would love to ask them for a freebee for all its worth!

2008 Sep 02 10:50 PM

[appledeadmoney:]

Blah...blah...blah... The final shoe will drop on the financials in the near future and the market will see a significant drop sometime in October.... Light volume on the indexes are leading up to this final bear market crescendo...

After this occurs and 500 to 1000 more financial institutions close their doors and CNBC's Larry Kudlow admits he has no "flippin" idea what he is talking about then, and only then, will everything possibly get back to normal. Oh, and yes, at that time, may the surviving financial institutions be out of the woods......

2008 Sep 03 01:18 AM

[buyitcheap:]

market timer - you are spot on.... see you at the bottom!

2008 Sep 03 07:28 AM

[David Martin:]

You aren't in Kansas anymore, and the wizard of the Fed is about to be revealed when the curtain is pulled back on the horrendous losses they have been shoving from a bankrupt and over-leveraged banking system on to the taxpayer.

2008 Sep 03 09:09 AM

[8-Alpha-Zulu:]

good grief! what a joke, an absolute joke.

2008 Sep 03 04:24 PM