$470 Billion through 2010...Moody’s states that it expects US rated banks will incur a total of approximately $470 billion (pre-tax) of loan and security losses and write-downs in 2009 and 2010. The lending portion of this estimated loss is $415 billion, or 8% of the industry’s outstanding loans at the end of last year.As a result of these substantial asset quality problems and the need to build reserves, many US banks will be unprofitable in 2009, placing considerable strain on their capital levels, the rating agency says in its Annual Banking System Outlook for the United States. .Highlighting the key challenge to bank profitability, Moody’s said that, despite heightened provisioning over the past several quarters, banks’ coverage of bad loans continues to drop; the ratio of allowance for loan losses to non-performing loans stood at 70% at March 31, 2009 versus 100% in the first quarter of 2008."Under more adverse conditions, numerous US banks could become insolvent by the end of 2010,” said Moody’s. “More specifically, based on our modeling of such an adverse scenario,” the analyst states, “we calculate that US rated banks could incur a total of approximately $640 billion (pre-tax) of loan and security losses and write-downs in 2009/2010; without additional capital, this means that more than a third would fall below investment grade on a standalone basis …”http://seekingalpha.com/article/141219-u-s-banks-to-lose-or-......rk (bank bagholder)
I don't buy that story. I think it's just Moody's - having been caught with their pants around their ankles before - are now heaping negative news because it's fashionable. It does not hold water and the people who are putting out these warnings have no credibility.
Have to admit my heart skipped a beat before I realized it said US banks and not US Bank.
Good catch...I missed that until you said something...although, it would have been pretty impressive for USB to lose $470 billion when they have assets of $265 billion...that would be auto industry like epic failure!
"It does not hold water and the people who are putting out these warnings have no credibility."^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Unemployment rate continues to rise.Home prices continue to drop.Bankrupt GM and Chrysler - plus the parts makers plus the dealerships.Just where is there an indication that bank earnings have any way of increasing this year? Loses are just beginning to be recognizedand debts get pais off only through growth in the economy.Howie52IMHO The banking problems may not be resolved for years. If a bank is capable of surviving, there may be justification to buythe stock if you have a ten year outlook or more.
I do have a ten year or more horizon. If I did not, I would be almost completely in bonds and TIPs.Check out the stock market indices over the past year. See the sharp bottom in March? The stock market is typically six to nine months in advance of the overall economy. No surprise that layoffs are continuing - they always do. It will become a non-story AFTER the fact. To come up with investment theses you need to be trying to anticipate what will happen. The doom and gloom scenario is great, but I think it is overplayed.
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