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US banks likely to fail as bad loans soar
By Joanna Chung and Saskia Scholtes in New York
Published: May 29 2008 20:43 * Last updated: May 29 2008 20:43
US banks set aside a record $37.1bn to cover losses on real estate loans and other credits during the first quarter in a sign of the growing economic pain being caused by the global credit crisis, regulators said on Thursday.
Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation, said it was likely loan-loss provisions and bank failures would rise in coming quarters as the fallout from market turmoil hits the real economy.
EDITOR’S CHOICE
Regulators to focus on OTC trades - May-27In depth: Credit squeeze - Feb-26The Short View: Black Swan - May-13Capital market deals raise $20bn - May-11Lex: European earnings - May-12AIG plunges to record loss - May-09“While we may be past the worst of the turmoil in financial markets, we’re still in the early stages of the traditional credit crisis you typically see during an economic downturn,” she said, adding: “What we really need to focus on is the uncertainty surrounding the economy . . . and again it is all about housing.”
Ms Bair spoke as the FDIC released its quarterly banking profile, which showed loan-loss provisions in the first quarter were more than four times higher than last year’s level. That was the main reason bank earnings fell 46 per cent to $19.3bn from the first quarter in 2007 for the commercial banks and savings institutions where the FDIC insures customer deposits.
Following restatements by banks, the FDIC revised the industry’s net income for the fourth quarter of last year from $5.8bn to $646m – the lowest since the end of 1990.
Meanwhile, the FDIC said the number of “problem” banks rose in the first quarter from 76 to 90, with combined assets of $26.3bn. Three US banks have failed this year, compared with three for the whole of last year and none in 2005 and 2006.
http://www.ft.com/cms/s/0/4d695720-2db6-11dd-b92a-000077b07658.html?nclick_check=1
By Joanna Chung and Saskia Scholtes in New York
Published: May 29 2008 20:43 * Last updated: May 29 2008 20:43
US banks set aside a record $37.1bn to cover losses on real estate loans and other credits during the first quarter in a sign of the growing economic pain being caused by the global credit crisis, regulators said on Thursday.
Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation, said it was likely loan-loss provisions and bank failures would rise in coming quarters as the fallout from market turmoil hits the real economy.
EDITOR’S CHOICE
Regulators to focus on OTC trades - May-27In depth: Credit squeeze - Feb-26The Short View: Black Swan - May-13Capital market deals raise $20bn - May-11Lex: European earnings - May-12AIG plunges to record loss - May-09“While we may be past the worst of the turmoil in financial markets, we’re still in the early stages of the traditional credit crisis you typically see during an economic downturn,” she said, adding: “What we really need to focus on is the uncertainty surrounding the economy . . . and again it is all about housing.”
Ms Bair spoke as the FDIC released its quarterly banking profile, which showed loan-loss provisions in the first quarter were more than four times higher than last year’s level. That was the main reason bank earnings fell 46 per cent to $19.3bn from the first quarter in 2007 for the commercial banks and savings institutions where the FDIC insures customer deposits.
Following restatements by banks, the FDIC revised the industry’s net income for the fourth quarter of last year from $5.8bn to $646m – the lowest since the end of 1990.
Meanwhile, the FDIC said the number of “problem” banks rose in the first quarter from 76 to 90, with combined assets of $26.3bn. Three US banks have failed this year, compared with three for the whole of last year and none in 2005 and 2006.
http://www.ft.com/cms/s/0/4d695720-2db6-11dd-b92a-000077b07658.html?nclick_check=1