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Moody's Muddier Outlook On Financials: Soon To Be Ex-NRSRO Sees "Significant Strain On U.S. Financial System"
Moody's has released a new report, titled "U.S. Rated Bank Asset Quality Over the Peak, Lookout for a Bumpy Downhill Ride." As one can imagine, in its Moody's notes that Financials' asset quality is now over the peak, and it is looking for a bumpy downhill ride. (Like anyone can take them seriously). In it the rating agency says: "We believe rated U.S. banks have recognized approximately 60% of the
aggregate loan charge-offs that they will realize from 2008 to 2011.
Although remaining losses are sizable, they are beginning to look
manageable in relation to bank's loan loss allowances and tangible
common equity. However, a worsening of the global
economy in 2010, the probability of which Moody's places at 10% to 20%,
would significantly strain U.S. bank fundamental credit quality -- and
it is this issue that drives our continuing negative outlook for the
U.S. banking sector." Since Moody's saw 0% chance of the crash of 2008 happening, the reality adjusted probability of a quintuple dip according to the last statement is about 2,000%. Plan your illiterate SPARC "cash cow" HFT workstations accordingly.
Full Moody's press release:
U.S. Banking Industry Fundamental Credit Conditions - 1Q10
New York, June 02, 2010 -- In its latest quarterly report on the fundamental credit conditions of the U.S. banking system, Moody's Investors Service said that U.S. rated bank asset quality issues are past the peak but charge-offs and non-performers remain near historic highs. "The return to 'normal' levels of asset quality will be slow and uneven over the next twelve to eighteen months," said Moody's Senior Vice President Craig Emrick.
"We believe rated U.S. banks have recognized approximately 60% of the aggregate loan charge-offs that they will realize from 2008 to 2011. Although remaining losses are sizable, they are beginning to look manageable in relation to bank's loan loss allowances and tangible common equity," noted Emrick. However, a worsening of the global economy in 2010, the probability of which Moody's places at 10% to 20%, would significantly strain U.S. bank fundamental credit quality -- and it is this issue that drives our continuing negative outlook for the U.S. banking sector.
More generally, this report reviews the actual loss experience for rated U.S. banks from 2008 through the first quarter of 2010, comparing it with Moody's earlier estimates, laid alongside the fundamental credit conditions of the U.S. banking industry.
The report's highlights also include the following:
--The negative outlook for the U.S. banking system is driven by asset quality concerns and effects on profitability and capital. Aggregate annualized net charge-offs came to 3.3% of loans in Q110 (versus 3.6% of loans for Q409 annualized). Despite two consecutive quarters of improvement in charge-offs, they remain near historic highs dating back to the Great Depression.
-- The decline in aggregate charge-offs was driven by commercial real estate (CRE) improvement which we believe is likely to reverse in coming quarters. A similar commercial real estate decline was experienced in the first quarter of 2009 before charge-offs accelerated through the rest of the year.
-- Non-performing loans remained at 5.0% of loans at March 31, 2010.
-- U.S. rated banks have already charged off or written-down $436 billion of loans in 2008, 2009 and Q110, leaving $307 billion to reach our full estimate of $744 billion of loan charge-offs in 2008 through 2011. In aggregate, the banks have recognized 60% of Moody's estimated total charge-offs and 65% of estimated residential mortgage losses, but only 45% of estimated commercial real estate losses.
--The US banks' allowances for loan losses stood at $221 billion as of March 31, 2010, which is equal to 4.1% of loans. Although this can be used to offset a sizable portion of remaining charge-offs, banks will still require substantial provisions in 2010.
--We have incorporated our expected loss estimates into our views of banks' capital adequacy and ratings. However, our rating outlooks, the majority of which remain negative, are influenced by the potential for a worse-than-expected macroeconomic environment. More severe macroeconomic developments, the probability of which we place at 10% to 20%, would significantly strain U.S. bank fundamental credit quality.
The report is titled "U.S. Rated Bank Asset Quality Over the Peak, Lookout for a Bumpy Downhill Ride."
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Moody's is as worthless as tits on a bull.
Is Moody's as worthless as Bob's bitch tits?
"Since Moody's saw 0% chance of the crash of 2008 happening..."
Soooo priceless...
What if you're a gay bull?
"We believe rated U.S. banks have recognized approximately 60% of the aggregate loan charge-offs that they will realize from 2008 to 2011."
We believe? Isn't it their job TO KNOW?
How does this statement mesh with the FASB rule changes? How were the losses realized? Were the losses realized by a transferance to the Fed balance sheet?
What a crock of shit. Along with the corrupt representatives, the hostage regulators, the Fed, and the main stream media; the ratings agencies are amongst the most complicit for this farce of a fraudulent economy.
If there was any justice this guy would be giving his testimony in an orange jumpsuit.
"We believe rated U.S. banks have recognized approximately 60% of the aggregate loan charge-offs that they will realize from 2008 to 2011."
Good questions. When and how was this done?
My sentiments exactly.
"We also believe" that pigs can fly and that Obama is the messiah.
Simply put, it's a WAG.
The guesstimate is only as good as the value of the underlying collateral and the underlying assumptions for rates of default.
The problem is that the aggregate charge offs NOT realized may change-- dramatically. Then the 60% changes to, say... 40%... pick a number.
Complete and utter lawlessness, stupidity, and absurdity on all levels.
Every day it becomes clearer and clearer to me that there really is no hope, and we are headed for absolute unmitigated disaster.
Agreed. Get back to me when you can join me for a brew at the Apathy Bar & Grill.......
The system is broken. Everyone knows it. Yet, the PTB are doing everything in their power to keep it together. If their motives were honorable and were doing what they felt was best for America, I would not be as upset. The problem is that their motives seem to be purely self-serving. Wall Street has taken Main Street hostage and is essentially running the game. They are doing "God's work" after all. They can do whatever they feel like doing, the heck with everyone else. The problem is that they are not fixing the underlying problems. Instead, they are doubling down with the hope that everything will miraculously come back to some normal. Sadly, I don't find them competent enough to get us there.
Too much debt worldwide. Asset values and incomes can not support it. Accounting games and derivatives mean nothing. This is not complex math. They would like all to think it is.
The bankers have (temporarily) achieved the nirvana they always believed they would and could. Once they own all, they assume that they will be able to rule serfdoms. They assume wrong. They will die spitting blood.
The system IS entirely broken, and now those who broke it refuse to admit it. Now what we see day to day is much bustling about to deny whats obvious to anyone with a brain, the biggest display of denial ever, theyre only concerned with self preservation as they know death in the streets awaits them.
Utter crap: the ECB just stated that European
banks are in for 195 billion euros of writedowns
in 2010-2011, who are they trying to convince ?
Deep Shah.
Since 2006, there has been more mortgage debt than equity in residential real estate. That has not happened in the past 50 years. Meanwhile, the junk loan resets continue through 2012.
Good luck to anyone handicapping the odds on bank survival.
And they're projecting this in the middle of 2010??? How do I get into this business?
Is something looking bullish ?
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
As Rosenberg wrote today - 3 Ds. Debt Deflation Denial.
Market up on promised jobs number. Idiocy.
"reality adjusted probability"
Well done TD. Fischer Black would be proud.
Sweet call, I missed that.
Btw +10
"We believe rated U.S. banks have recognized approximately 60% of the aggregate loan charge-offs that they will realize from 2008 to 2011."
How about this.
Lets make the fair assumption they mean from financial reporting in 2008 to 2011. That means we have 6 quarters left out of 24. So we have 25% of the time left in which to report 40% of the overall losses. So a little maths tells me reported losses should accelerate from 60/75 to 40/25. Thats DOUBLE.
We should expect, according to this world-respected ratings agency, that losses reported over the next 6 quarters will be DOUBLE the average we have seen since Q1 2008.
I am short. Where is Meredith Whitney when you need her?
I am also drunk. This may be wrong. But it looks OK to mee.