As we showed previously, when it comes to banks' exposure to energy, things have gotten beyond nebulous, especially in the aftermath of the (officially denied, even though we stand behind it 100%) report that the Dallas Fed has been "advising" banks how to mark their oil and gas loan exposure in discussions behind closed doors.
To be sure, at least Citi has already admitted that while it will reveal its total energy exposure, it refuses to break out its reserves specifically aimed at the very troubled energy sector. Worse, even as oil prices have fallen to levels surpassing the 2008 decline, banks have at most taking tiny provisions in recent quarters, suggesting they fully expect to be made whole when the imminent default wave hits.
One thing is clear: banks are not only not telling the full story, but the story they are telling is compromised. Still one has to start somewhere with whatever data is publicly available, so courtesy of Reuters, here is a summary of what the big U.S. banks who have reported Q4 earnings so far, say about their energy exposure.
JPMorgan Chase & Co, No.1 U.S. bank by assets
- Energy exposure assumed at 1.6 percent of total loans
- "If oil reaches $30 a barrel - and here we are - and stayed there for, call it, 18 months, you could expect to see (JPMorgan's) reserve builds of up to $750 million."
- "Oil folks have been surprisingly resilient. And remember, these are asset-backed loans, so a bankruptcy doesn't necessarily mean your loan is bad."
Bank of America Corp, No.2 U.S. bank by assets
- Energy exposure assumed at 2.4 percent of total loans
- "Energy portfolio stress analysis shows $30 oil for 9 quarters would result in about $700 million of losses."
- "As we continue to assess and react to future changes in the energy sector, we could see lumpiness that could potentially drive provision expense over $900 million."
Wells Fargo & Co, No.3 U.S. bank by assets
- Energy exposure assumed at 1.9 percent of total loans
- "We're sensitizing our portfolio based on a continuation of very, very, very low oil prices ... in addition to scenarios that include an upward sloping curve, and we're comfortable with the amount of coverage that we have today."
- "At current price levels, we would expect to have a higher oil and gas losses in 2016."
Citigroup Inc, No.4 U.S. bank by assets
- Energy exposure assumed at 3.3 percent of total loans
- "If oil were $25 for sustained period instead of $30, estimated $600 million cost of credit in first half of 2016 could double."
- ** Goldman Sachs Group Inc
- No.5 U.S. bank by assets
- Energy exposure assumed at 2.1 percent of total loans
- "From our perspective we feel well-positioned (in terms of energy exposure)."
- "While we're very focused about it, and are certainly not being complacent about it, we feel pretty front-footed. Even on a relative basis, we have smaller exposures."
Morgan Stanley, No.6 U.S. bank by assets
- Energy exposure assumed at 5 percent of total loans
- "We've seen an increase in negative marks within corporate loan book, focus is around energy."