Major Banks Just Over Halfway Through Credit Cycle -Citigroup
By Brendan Conway, Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Major U.S. banks are slightly more than halfway
finished absorbing loan losses from the financial crisis and building up
reserves, Citigroup said Monday.
The firm's equity strategists further predicted that the banks will be only
two-thirds finished with that process by the end of 2010, highlighting what is
still likely to be a long slog.
Of the banks under coverage, Citigroup cited Wells Fargo & Co. (WFC) and PNC
Financial Services Group Inc. (PNC) as furthest along among large-capitalization
banks. First Horizon National Corp. (FHN), Synovus Financial Corp. (SNV),
Marshall & Ilsley Corp. (MI) and Fifth Third Bancorp (FITB) are the mid-sized
banks named.
On the other end of Citigroup's analysis were M&T Bank Corp. (MTB), Comerica
Inc. (CMA) and BB&T Corp. (BBT), which Citigroup said have "heavy" exposure to
commercial and industrial loans and commercial real estate.
Citigroup doesn't cover itself in the research note, which was released
Tuesday morning.
Most Citigroup analysts forecast several quarters at minimum for banks to earn
their way out of problem loans and return to "normal" earnings. In Citigroup's
analysis, even banks regarded as relatively strong are expected to take a year
or more.
J.P. Morgan Chase & Co. (JPM) is forecast to take about a year and a half, and
Wells Fargo just over a year.
The banks cited as needing the longest time are Regions Financial Corp. (RF)
and KeyCorp (KEY), just under three years.
The estimate follows an earnings season in which executives of several major
banks pointed to a slowing in bad-loan growth as a sign of recovery, even though
the total amount of such loans on most banks' balance sheets continued to rise.
-By Brendan Conway, Dow Jones Newswires; (212) 416-2670; brendan.conway@
dowjones.com
(END) Dow Jones Newswires
12-01-091111ET
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