Seeking Alpha

Finance Banter's  Instablog

Finance Banter
Send Message
Finance Banter, part of the Banter Network, brings some of the best minds in investing to one site. Our writers have extensive experience in the markets and share their insights with you right here. We believe that education and experience are crucial to success in the market and though the... More
My company:
Finance Banter
My blog:
Finance Banter
  • Frightening Trend – Regional Banks Bad Loan Exposure is 22% and Rising 0 comments
    Nov 18, 2009 9:08 PM | about stocks: RKH, KRE
     This trend is yet another reason why the flight-to-quality trade is still present in the US bond market and credit remains tight. Check out this graph depicting the rate of exposure to bad loans held by US banks:

    Bank exposure to Troubled Loand

    Source: Moody’s

    The regionals are by far in the worst shape. So far in 2009, the FDIC has seized 123 banks, up from 25 in 2008 and only three in 2007. How do those numbers compare to past banking crises? Two decades ago in 1989, during the S&L crisis, 531 banks failed during the peak year with several hundred failures in the years preceding and following. While industry consolidation has greatly reduced the number of banks outstanding in the US, we still have a long way to go before the failures will subside. For clues on who is next, the FDIC has listed over 400 more banks on their “troubled” list. The number of regional bank failures will continue to increase until this group shows that they either have adequate capital ratios to cover losses or the number of troubled loans diminishes significantly.

    Market implications are that the flight-to-quality in bonds will continue and it is obvious that government intervention as a backstop in buying agency mortgage-backed securities is artificially keeping the loan market afloat. Expect credit conditions to remain strained well into 2010 and 2011 and don’t expect the FED to even think of raising rates while the exposure on troubled loans keeps going up.

    Resources: FDIC, Moody’s

    Disclosure: None

    Themes: Loan Loss, Regional Banks Stocks: RKH, KRE
Back To Finance Banter's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.