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Toxic oil loans create trouble for big banks
CNN ^ | April 14, 2016: 11:55 AM ET | Matt Egan

Posted on 04/14/2016 9:45:02 AM PDT by PAR35

...

Bank of America (BAC) on Thursday announced it set aside $997 million to protect from loan losses, mainly in the bank's $22 billion energy portfolio.

Wells Fargo (WFC) warned of "significant stress" and "deterioration" in the oil and gas space. The problems there forced Wells Fargo to add $200 million in loan-loss reserves, its first increase to this rainy-day fund since 2009.

And JPMorgan Chase increased its provisions for credit losses by 88%, mostly due to the oil, natural gas and pipeline business. It was enough to cause JPMorgan's (JPM) first drop in profits since late 2014.

...

(Excerpt) Read more at money.cnn.com ...


TOPICS: Business/Economy; Extended News; News/Current Events; US: Texas
KEYWORDS: bac; bankofamerica; banks; banksters; bigbanks; boa; default; depression; energy; jpmorgan; jpmorganchase; methane; oilderivatives; oilloans; opec; petroleum; shortages; tbtf; wars; wellsfargo
Bank stocks are up sharply today on this news.
1 posted on 04/14/2016 9:45:02 AM PDT by PAR35
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To: PAR35

And when they guess wrong on an investment they start whining and want us to bail them out.


2 posted on 04/14/2016 9:50:53 AM PDT by Buckeye McFrog
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To: PAR35

keep in mind a largely under reported meeting by the G20 last December (don’t remember the exact date) led to an agreement that depositors’ money is not really their money.

If the worst happens, some or all of it can be turned into equity (shares of the bank stock), and the depositor is nothing more than an unsecured creditor.

IOW, your money is no longer your money. Never heard much from our ‘conservative’ Republican controlled Congress about this either. I wonder why?

This is why the big push for the cashless society. So that there will be no way to avoid it; as there will be no cash to pull out.


3 posted on 04/14/2016 9:53:08 AM PDT by MichaelCorleone (Jesus Christ is not a religion. He's the Truth.)
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To: PAR35

It’s always something.


4 posted on 04/14/2016 10:08:36 AM PDT by b4its2late (A Liberal is a person who will give away everything he doesn't own.)
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To: PAR35

There is a reason the old laws had some rather strict limits on what type of loans banks can give out.

Oh well.


5 posted on 04/14/2016 11:08:15 AM PDT by redgolum
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To: PAR35

“What goes around comes around.”

Shades of the oil crash in 1986. We also had one here in Texas in 1982. I know them well along with the year 2009.

They were bad years but nothing like the current recession...no...outright depression here in South Texas. The city of Alice has lost most of its tax base and has nowhere to turn other than “fleecing” those who own property and real estate. Many cities are experiencing the same.

With that said, during the 1986 oil depression I can remember several of my fellow businessmen having their commercial loans “called” by the bank even though they were not behind. Found out later that some of the banks were “calling” good notes from small business just to keep the “cash flow” running since the “big boys” crashed and left the banks “holding the bag.” It was a very bad time then.

Now, here we go again and this time when the smoke clears there are going to be a whole lot of dead businesses, towns and industries that will bring down many big banks with them.

Our Affirmative Action President and both greedy political parties can “pat themselves on their backs” for a job well done. They have allowed graft, corruption, environmental Nazism and the faux alternative energy to “kill the goose that lay the golden eggs.”


6 posted on 04/14/2016 11:30:29 AM PDT by DH (Once the tainted finger of government touches anything the rot begins)
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To: DH
With that said, during the 1986 oil depression I can remember several of my fellow businessmen having their commercial loans “called” by the bank even though they were not behind. Found out later that some of the banks were “calling” good notes from small business just to keep the “cash flow” running since the “big boys” crashed and left the banks “holding the bag.”

There may be more to it than that. Reasons a paying loan might be called:

Undercollateralized. If the collateral has declined in value since the loan was made, the regulators may require the bank to classify the loan even if it is paying on time. The bank must either then get more collateral from the borrower, classify the loan and take a hit against capital which they might not be able to absorb, or demand the borrower repay in full.

The loan might not actually be called, but the bank might decline to extend it. The borrower may have a term loan (as short as 90 days, more likely a year) that they've rolled for years, keeping the interest paid on time, adjusting the balance up or down as needed, with the bank perhaps making some fee income from the renewals. Again, the regulator shows up, doesn't care that payments have been made for years, and determines it is not a good credit.

The bank may have hit lending limits. The bank's lending base has shrunk, the loan is good, but the bank can't renew it because it would exceed the new, lower lending limit imposed by the regulator. (This is sort of related to your 'keep the cash flow' scenario, but a lot of troubled banks don't go down because of cash flow, they fail because of capital issues.) I remember talk in the early 90s that the Feds wanted to get down to about a dozen megabanks. At the time there were probably about 3x the number of thrifts and banks that there are now.

7 posted on 04/14/2016 11:48:57 AM PDT by PAR35
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To: PAR35

The low oil and unnaturally high dollar game may have been the last QE before the fall. That was quite a show, waves of propaganda in advance and all. Next round, far enough into the future, oil will be even more expensive to extract, and the price bottom will be higher.


8 posted on 04/14/2016 7:48:13 PM PDT by familyop ("Welcome to Costco. I love you." --Costco greeter in the movie, "Idiocracy")
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