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’Playing provisions to pass a test
It’s not hard to criticise the methodology of Europe’s stress tests.
From the inclusion of mitigating factors not yet undertaken by banks, to the lack of a full sovereign default, you can take your pick,
Europe’s non-performing loan zones
Here’s PricewaterhouseCoopers’ (theoretical) non-performing loan (NPL) barometer:
If you’re a banking system, you want to be in Quadrant A — with a low percentage of NPLs that are relatively well-provisioned for,
Good books, bad books at the banks
Spotted on the Financial Accounting Standards Board website:
FASB may have backed off mark-to-market accounting for banking assets, but the US accounting body might still decide to make some significant changes to the way banks provision for loan losses (you know,
Loan loss reservations, US bank earnings
Did you think US banks’ 2010 results would actually mean something?
Silly you. Don’t you know their earnings — like those from 2009 — will be skewed by falling loan loss provisions set aside to cover bad debt.
The Spanish (asset) Elimination
A top-read story on Bloomberg this Thursday morning?
One that combines the words ‘foreclosed homes’ with ‘Spain’ and ‘tripled’ :
Nov. 25 (Bloomberg) — The number of foreclosed homes for sale in Spain may triple next year as new accounting rules prompt lenders to dump their depreciating assets,
Coup de coverage ratio
Banks’ coverage ratios are a favourite topic here on FT Alphaville.
They’re often one of the prime drivers of European and US bank profit — witness those recent second-quarter earnings — and at the same time are dictated by the banks’ own discretion and prudence.
The provisioning pain in Spain stays mainly in the cajas
All hail the Spanish central bank’s long-awaited changes to the way banks provision for loan losses.
The proposed amendments are available on the Bank of Spain’s website, in Spanish.
Luckily Nomura’s Daragh Quinn has a handy English summary,
‘We believe the market might be underestimating the risks the [Spanish] financial system faces’
Straight reporting this.
On Thursday Credit Suisse cut their 2010-2012 earnings estimates and price targets for all the Spanish banks they cover by an average 11 and 7 per cent, respectively. They currently have underperform ratings on purely domestic Spanish banks,
BBVA, an exercise in Spanish banking losses
Remember BBVA?
The Spanish bank surprised markets last week with an earnings miss, causing its shares to fall about 6 per cent on the day.
In addition to revaluing some of its US business, the bank also “reassessed”
Shadow bank losses
Alternative title: “How loan modifications distort bank results”.
Barclays Capital speculated last month that non-performing loans (NPLs) may peak in 2010. A few weeks on, and the bank is saying net-charge-offs (NCOs) may have peaked based on US banks’ recent fourth-quarter (2009) earnings.
Spot the odd one out
Related links:
Good banks, bad banks – FT Alphaville
Banks’ coverage ratio capers cont. – FT Alphaville
Great Depression-esque bad debt at banks – FT Alphaville
Citi’s so-called credit caution
Citi may still claim to be “cautious” about the outlook for future credit losses, but its loan-loss reserve build suggests it’s really quite optimistic about future credit prospects. Or at least, it’s acting that way.
Banks don’t just have an asset problem, says Moody’s
Here’s the Moody’s report that is making waves in financial media circles on Tuesday morning.
The basic premise: The average maturities of new debt issuance by Moody’s-rated banks around the world fell from 7.2 years to 4.7 years over the last five years — the shortest average maturity on record.
Regulators looking at banks’ coverage ratios, BarCap says
Remember the issue of declining coverage ratios at European and US banks?
Coverage ratios are essentially loan loss reserves (provisions for bad debt) divided by non-performing loans, and they declined in the second-quarter for European banks and the third-quarter for US banks,