Wells Fargo, Key Bank and others increase loan loss reserves against bad loans

July 22, 2009 by · Leave a Comment
Filed under: Industry News 

This fits with what has been reported here for over a year now about the coming loan defaults, increasing unemployment and how that is going drag down more banks that has large amounts of these dodgy loans on their respective balance-sheets.  In this Reuters article they mention the coming trouble in the Commercial Real Estate market and that has been covered here and in our sister publication (Commercial Finance Blog).

News (Reuters):

Wells Fargo & Co and several other major U.S. banks said the troubled economy drove big increases in bad loans, reducing second-quarter earnings.

Wednesday’s results provided fresh evidence the nation’s banks still face a tough road as loan losses once concentrated in home mortgages migrate to commercial loans, commercial real estate loans and credit cards. While some banks have reported big profits, analysts fear that may not be sustainable.

“Some banks show early signs of slowing deterioration, but there is growing weakness in commercial real estate, which will worsen,” said Gerard Cassidy, an analyst at RBC Capital Markets in Portland, Maine. “This is no longer just a residential housing and home equity problem.”

Rising loan losses also reduced earnings at U.S. Bancorp, SunTrust Banks Inc and KeyCorp. All four banks said they have built capital buffers required by U.S. regulators following “stress tests” earlier this year.

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