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A Review of 4th Quarter FDIC Bank Data
The 4th Quarter FDIC Bank Data has been updated at
www.wlmlab.com. Each quarter I eagerly anticipate the numbers and keep
thinking "it can't possibly be worse than last quarter, can it?"
Well, never fear, it can.
First off, the total amount of loans outstanding at U.S.
Regulated Depository Banks has fallen to $7.296 Trillion from $7.425 at the end
of Q3 2008.
Now, as a former Bank Risk Manager (as well as Collection Manager)
I can tell you that this is a necessary step in the healing process. As a
taxpayer, however, I can tell you that this is fairly demonstrable confirmation
that the justification for TARP was pretty much a load of crap.
In the past 18 months, banks have dropped over $703 Billion
in loan balances. Much of this is thru charge offs, however, much is due to
better credit management as well as consumers & businesses paying off
debts. Once again, a healthy part of the process.
Where the drops in loan balances have come from by the major
loan portfolios:
We've dropped 6.90% in 1-4 Family 1st Liens and 23.87% in
1-4 Family Junior Liens. No surprise here really. Amazingly, banks actually
have MORE loans on the books for Commercial Real Estate, Home Equity Loans,
Credit Card Loans and Multifamily Residential.
The big shocks, to me at least, are the major drops in
Commercial & Industrial ($284 Billion, 18.81%) and Construction &
Development ($165 Billion, 26.82%). The C&I drop is enormous and is
indicative of businesses borrowing to invest in future growth. While the
Construction loan drop may not necessarily be entirely unexpected it is once
again an economy-wide tell. We've dropped over $41 Billion in Construction lending in the past quarter alone - an astounding 8.33%.
How are loan delinquency rates? Well, once again the
numbers are somewhat mind boggling. 1-4 Family First Liens Late stage delinquency
rates (90+ days past due) are climbing at an alarming
rate:
Unfortunately, the 30-89 days past due chart is climbing as well:
A quick summary for Late Stage Delinquencies for the four largest Loan
Portfolios (click portfolio to get more detail):
1-4 Family First Liens: up dramatically from 3.97% to 4.92%
Commercial & Industrial: down slightly from 0.37% to
0.36%
Commercial Real Estate: down from 0.40% to 0.37%
Loans to Individuals: up from 1.55% to 1.73%
The C&I and Commercial RE late stage delinquency numbers are
improving due to an apparent willingness to charge
them off (or is it an inability to stop them?). It's extremely obvious that bank's are just stacking up late stage on
1-4 Family 1st Liens and Loans to Individuals. My albeit limited take on this is that banks have more flexibility in "working with" Consumers to avoid charge offs than they do in working with Businesses.
A quick review of Wells Fargo:
Wells has a 17.39% delinquency rate on their 1-4 Family 1st Liens versus 6.80% for the rest of the Nation. I'll set aside the Bank Reg versus GAAP Financials discussion and focus on what this means for the consumer and housing. WFC has an enormous amount of late stage delinquencies that will eventually charge off and hit the market as OREO. Whether or not they have a Government Guarantee on the debt will not limit it's impact on the housing market.
A quick review of JPMorgan Chase:
Similar, but not as bad as WFC, Chase is running a high delinquency rate on pretty much every portfolio. Their Commercial & Industrial as well as their Construction & Development loans are deteriorating quickly. These are more indications of trouble in the business sector.
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Sexy. The colour red has always made my hungry.
If the two of them were not TooBigToFail they'd have been given the R&R treatment, so instead we give them tax payer $$ and the brass gets bonuses. And they say size isn't important! Ha!
excellent excellent post....not too long but packed with insightful information....
"As a taxpayer, however, I can tell you that this is fairly demonstrable confirmation that the justification for TARP was pretty much a load of crap."
you have earned a fan with that observation....i was screaming to my congressshit in sept 2008 to vote no on tarp...i think he voted no but obviously it was not enough.....
Could that explain the relative IYR stength?
"it's going to get worse before it gets better"
Correction
"it's going to get alot worse and then its going to get worse!"