Wells Fargo Is Bad, But Citi Is Worse
Earlier we reported that Wells Fargo may have an energy problem because as CFO John Shrewsbury revealed, of the $17 billion in energy exposure, "most of it" was junk rated.
But, while one can speculate what the terminal cumulative losses, cumulative defaults and loss severities on this loan book will be, at least Wells was honest enough to reveal its energy-related loan loss estimate: it was $1.2 billion, or 7% of total - as Mike Mayo pointed out, one of the highest on the street. Whether it is high, or low, is anyone's guess, but at least Wells disclosed it.
Citi did not.
Yes, the bank did disclose its holdings to the oil and gas sector at $21 billion funded and $58 billion which included unfunded (watch that unfunded exposure collapsing and shrinking the available pool of shale company liquidity in the coming weeks), and it did announce that it "built roughly $300 million of energy-related loan loss reserves this quarter", but paradoxically one thing it did not disclose was its total reserves to energy.
Note the following perplexing exchange between analyst Mike Mayo and Citi CFO John Gerspach:
<Q - Mike Mayo>: Can we move to energy, though? I don't want you being the only bank not disclosing reserves to energy - oil and gas loans. I mean, I think most others have disclosed that who have reported so far. And I mean, your stock's down 7%. The whole market is down a whole lot, but I don't - even if it's a low number, it can't hurt too much more from here. And so can you - how much in oil and gas loans do you have, and what are the reserves taken against that? I know you were asked this already, but I'm going back for a second try.
<A - John C. Gerspach>: When you take a look at the overall portfolio, Mike, we've reduced the amount of exposure. Our funded exposure to energy-related companies this quarter is down 4%. It's about $20.5 billion. The overall exposure also came down about 4%. The overall exposure now is about $58 billion, that includes unfunded. When you take a look at the composition of the funded portfolio, about 68% of that portfolio would be investment grade. That's up from the 65% that we would have had at the end of the third quarter. And the unfunded book is about 87% investment grade. So while we are taking what we believe to be the appropriate reserves for that, I'm just not prepared to give you a specific number right now as far as the amount of reserves that we have on that particular book of business. That's just not something that we've traditionally done in the past.
And yet all other reporting banks have done it not only in the past, but this quarter as well.
One wonders just how much of Gerspach's decision was dictated by the Fed's under the table suggestion to avoid mark to market in energy entirely, and thus to stop marking its loan book. To be sure, without knowing the total amount of reserves to oil are, one simply can't do any calculations on Citi's total energy book, even if the once already bailed out bank so eagerly provided the incremental addition to this reserve. As if that number is in any way helpful.
Finally, we eagerly await for someone from the Dallas Fed to contact us and to comment on our article from yesterday that the "Dallas Fed Quietly Suspends Energy Mark-To-Market On Default Contagion Fears." Because with megabanks such as Citi refusing to disclose energy losses, the longer the Fed remains mute on just what it knows that nobody else does, the more concerned the market will be that the subprime crisis is quietly playing out under its nose all over again.
But one thing is certain: the panic can begin in earnest when Janet Yellen says, at the next Fed press conference, that "energy is contained."
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Flunky: Coach, coach, I got the play from the White House here.
Tomlin: Gimme that.
(scans the fax briefly)
What the fuck does Tee off at 3 mean?
Probably to drive the DBs deep and let one guy slide in open underneath.
I wonder how loud Roethlisberger is going to scream once that trainload of painkillers wears off.
Go Broncos.
Go Cardinals.
Once again the interest being paid by the FED has this covered...
Just wait until all this unregulated " dark pool" aka "private equity" shenanigans blows like an ' Super Volcano'.
Prop desks never died, they just got a makeover.
Yen - can't the banks just re-rehypothecate more copper and thus the problem solved? I mean it worked for China, right?
/s
Copper is only $2.00 ;-)
I can't decide who i hate more...banksters or politicians. One thing I can say about both is that they are at the top of my most hated ever list!
It's like choosing which proceedure you'd rather have less... a colonoscopy, or a vasectomy.
so, uh, is Tuesday going to be a bad day for the Dow?
Probably not. I'm looking at credit spreads, swaps, OIS in F/X, interbank lending and risk premiums.
Also bond markets, short duration junk stuff.
The answer is always out there... Due Diligence. ;-)
These companies would whore out their grandmothers to make a buck.
Just like Countrywide and Bear before the hammer fell.
Just watch The Big Short!
Be serious!… How could anything matter except money?
Physical Wealth.
there sure is a citiload of bad news out there
My Irish family quit using banks in the 1800s....different techniques to steal then, but taking your money is the name of the game.
Remember Glass Steagall. And FAZ.
The criminals at the Feral Reserve and in the TBTF banks have stolen trillions of dollars from the American People and other people around the world. But, they are immune from the consequences of their crimes because they wisely allocated a few billion dollars from their loot for generous bribes to Feral government politicians, regulators, prosecutors and law enforcement. Criminals who can afford to purchase immunity from prosecution can and do get away with anything.
Yes, which will include taxpayers taking the losses on this stuff.
We need regular audits of the Fed. The secret balance sheet with the fiscal backstop will just allow them to buy this crap from Citi and Wells as needed. Very corrosive, but these oligarchs are quite greedy.
If by audit you mean "post-mortem", I'm with you on that one.
I have a dream. I dream that politicians, bankers, Wall Streeters, Crony Corporate Fascists, Oligarchs and various and assorted other 0,1% human offal are raining down from skyscrapers onto concrete sidewalks all across the land—no, make that all around the world!
BIG SHORT........
HERE WE GO AGAIN.....TBTF
NEXT BIG BAILOUT WATING IN THE WINGS......ELECT HITLERY TO SAVE THE DAY.
HELL SHE'S ALREADY ON GOLDMAN'S PAY ROLL.