Every quarter, the FDIC releases a document called the Quarterly Banking Profile. It provides a wealth of data about banking industry losses, loan performance, failed banks, and more. The latest report (PDF Link) just hit the tape, and here are some of the details:
* The banking industry as a whole lost $26.2 billion. That was a large swing from the year-ago profit of $575 million that the industry generated. It was also the first time since Q4 1990 that U.S. banks, in the aggregate, lost money.
* Loan loss provisions soared to $69.3 billion from $32.1 billion in Q4 2007. Large trading losses and goodwill impairments were big contributors to bank losses. Noninterest income declined as loan servicing income fell $3.1 billion YOY and securitization income plunged 52.3%. On the other hand, net interest income climbed 4.9% and net interest margins inched up to 3.34% from 3.32%. The FDIC noted, however, that the improvement was mostly seen at large institutions. Smaller banks (sub-$1 billion in assets) had the worst margins since Q2 1988 due to upward pressure on deposit rates.
* Total net chargeoffs of loans and leases surged 132% to $37.9 billion from $16.3 billion a year earlier. If you annualize the quarterly charge-off rate, you get a reading of 1.91%, tying Q4 1989 for a record high (data collection goes back 25 years). By loan category, real estate construction and development loan charge-offs increased 448% year-over-year. One to four family residential mortgage charge-offs jumped 206%, while commercial and industrial COs climbed 97.3% and credit card COs rose 60.1%.
* Noncurrent loans and leases are also climbing. Noncurrent loans rose to $230.7 billion from $110.7 billion a year earlier, a surge of 108.4%. Some 2.93% of loans and leases are now noncurrent, the highest percentage since 1992.
* Banks added $16.5 billion to their reserves in the fourth quarter, while cutting total loans. That cause the ratio of reserves to total loans to rise to a 14-year high of 2.2%. But noncurrent loans rose more sharply than reserves, driving the reserves-to-noncurrent loans (or coverage) ratio down to 75 from 83.9. That’s the lowest since 1992.
* Finally, 25 banks with assets of $372 billion failed last year. That’s the highest tally since 1993, when 41 banks with assets of $3.8 billion failed. The total number of banks on the FDIC’s “Problem List” jumped to 252 from 76 at year-end 2007. Those institutions had total assets of $159 billion, up more than seven-fold from $22 billion a year earlier.
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Thanks Mike. I just saw this on line and I remember you talking about this situation. Federal Home Loan Bank of Boston Announces 2008 Loss, Suspends Quarterly Dividend
Looks like they’ve suspended other things too.
Mike
Your email this morning about Eastern Europe is more right than you may think. No one is thinking about cross-border lending. It is perfectly understandable for a government, when supporting its banks, to insist that domestic lending is the priority. In other words, the cost of government support is to wind down foreign committments, and all governments in Europe are trying to do this at the same time, without realising the consequencies. That is the asset side of a bank’s balance sheet.
On the liabilities side, banks are having great difficulty refinancing their loans in credit markets, and are desperately trying to contract their loan books anywhere.
The international bank lending baloon is deflating rapidly, and as the sovereign risks in E Europe accelerates, t is hard to see how a tipping-point for the European banks cannot be avoided
So, where does one put liquid assets, saved from destruction by bailing out in time?
The banks, the government and China just have more smoke and mirrors than the Russian stock market is all. You can only backstop a pig’s ear and call it a silk purse for only so long, as we are all finding out. No one even blinks now at nationalizing the banks. Why? Because they don’t call it that. They call it the government buying bank stocks under the pretense of backstopping them. If the banks were as good as their stock prices, they would stand on their own. If a bank, or any business, can’t stand on its own it is not worth much, hence the big correction in banking stocks is yet to happen. To me many stocks are artificially high also because their is an emotional sentimentality priced in. People love retail names like GE, Bank of Anerica, Wells Fargo and Citi.
Hello Mike,
I,ve just read your “lack of sleep” report—for want of abetter word. I was born in Cork Ireland, and still have family etc,etc, there. They are very worried not only about banks/financial institutions, but that the Gov,t could default.I have just moved 99.9% of my liquid assets to here in Canada where I now live. My thinking now is to keep assets(liquid especially) close to home.
Yours sincerely
Denis