Major Banks Just Over Halfway Through Credit Cycle -Citigroup
02 December 2009 - 3:26AM
Dow Jones News
Major U.S. banks are slightly more than halfway finished
absorbing loan losses from the financial crisis and building up
reserves, Citigroup said Monday.
The firm's equity strategists further predicted that the banks
will be only two-thirds finished with that process by the end of
2010, highlighting what is still likely to be a long slog.
Of the banks under coverage, Citigroup cited Wells Fargo &
Co. (WFC) and PNC Financial Services Group Inc. (PNC) as furthest
along among large-capitalization banks. First Horizon National
Corp. (FHN), Synovus Financial Corp. (SNV), Marshall & Ilsley
Corp. (MI) and Fifth Third Bancorp (FITB) are the mid-sized banks
named.
On the other end of Citigroup's analysis were M&T Bank Corp.
(MTB), Comerica Inc. (CMA) and BB&T Corp. (BBT), which
Citigroup said have "heavy" exposure to commercial and industrial
loans and commercial real estate.
Citigroup doesn't cover itself in the research note, which was
released Tuesday morning.
Most Citigroup analysts forecast several quarters at minimum for
banks to earn their way out of problem loans and return to "normal"
earnings. In Citigroup's analysis, even banks regarded as
relatively strong are expected to take a year or more.
J.P. Morgan Chase & Co. (JPM) is forecast to take about a
year and a half, and Wells Fargo just over a year.
The banks cited as needing the longest time are Regions
Financial Corp. (RF) and KeyCorp (KEY), just under three years.
The estimate follows an earnings season in which executives of
several major banks pointed to a slowing in bad-loan growth as a
sign of recovery, even though the total amount of such loans on
most banks' balance sheets continued to rise.
-By Brendan Conway, Dow Jones Newswires; (212) 416-2670;
brendan.conway@dowjones.com
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