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Bank Credit Quality Remains A Positive, But Its Benefits Could Fade

SNL Special Report

The repeated dose of good news that the banking industry has relied upon the past few years - improving credit quality - continued to boost lenders in the final quarter of 2013, though the benefits of that improvement could wane this year.

An SNL Financial analysis of regulatory filings found that adjusted nonaccrual loans across the U.S. commercial banking landscape declined in the fourth quarter of 2013 when compared with the previous period. They are down substantially from the final quarter of 2011. Net charge-offs in the fourth quarter, meanwhile, also fell and were down to a level that was less than half of where net charge-offs stood at the end of 2011.

Zions Bancorp., for example, reported that its measure of nonperforming assets plus loans that are 90 days or more past due and still accruing improved by nearly 40% in 2013, including a 13% improvement in the fourth quarter.

"Credit quality improved significantly during the past year," Zions Chairman, President and CEO Harris Simmons told analysts during a fourth-quarter earnings call. "I continue to be very encouraged with the results that we are seeing there," he continued, adding that there is "a lot of underlying strengthening."

Across the country, bankers and analysts attribute the positive momentum to an improving economy - albeit slowly improving - and tighter underwriting standards in the aftermath of the 2008 financial crisis.

"For most, credit is quite positive," Sterne Agee & Leach Inc. analyst Matthew Kelley told SNL.

Full SNL Financial Reports

http://www.snl.com/InteractiveX/Article.aspx?cdid=A-26820356-12335

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