財經觀察 1995 --- Stress-Tested Banks May Struggle for Funds

Stress-Tested Banks May Struggle for Funds as Bad Assets Triple
2009-04-24 04:00:12.0 GMT

By Elizabeth Hester and Linda Shen
     April 24 (Bloomberg) -- U.S. banks that get preliminary results today of government stress tests may struggle to raise money after bad assets at the biggest lenders almost tripled on average in the past year.
     Pittsburgh-based PNC Financial Services Group Inc. saw nonperforming assets -- those no longer accruing interest -- jump more than fivefold in the first quarter from a year earlier. They more than quadrupled at U.S. Bancorp in Minneapolis. At 13 of the largest U.S. banks, bad assets increased 169 percent on average from a year ago, according to first-quarter data compiled by Bloomberg.
     The tests on the 19 largest banks are expected to focus in part on loan quality as a measure of health. The lenders, which may need to raise $1 trillion in capital to cushion losses according to an April 23 KBW Inc. report, may have a hard time convincing investors to give them cash.
     “We’re really hesitant to put money into financials,”
said Douglas Ciocca, a managing director at Renaissance Financial Corp. in Leawood, Kansas, which has $1.6 billion under management. “The ambiguity is still engulfing the opportunity.”
     The preliminary results will be disseminated to representatives of the firms by Federal Reserve officials in a number of meetings at central bank offices today, according to a person familiar with the matter. The Fed is set to release the methodology for the exams to the public today.

                        Loan Defaults Soar

     The Obama administration may ask banks that need more capital to disclose how they plan to get additional funds when the government releases final results on May 4. Loan defaults as of the end of last year were at the highest levels since 1992, data from the Federal Reserve Bank of St. Louis show, and could climb higher as the U.S. economy weakens.
    The number of people staying on jobless-benefit rolls rose by 93,000 to 6.14 million in the week ended April 11, the 12th straight week the figure has set a record, the Labor Department said. Commercial loans in default or foreclosure jumped 43 percent in the first quarter to $65.9 billion from $46 billion at year-end, according to New York-based research firm Real Capital Analytics Inc. Property values have fallen at least 30 percent since their 2007 peak.
     Even if banks say their capital levels are adequate, the government could require them to raise more money, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said April 16 during the firm’s earnings conference call.

                          Dimon Says No

     “I don’t know what we need to do because it may not be solely up to us,” Dimon, 53, said in response to a question about whether the firm was planning to issue new equity. “I don’t think we need it.”
     New York-based JPMorgan’s nonperforming assets grew 185 percent in the past year to $14.7 billion, or 0.7 percent of the firm’s total. Bank of America Corp., based in Charlotte, North Carolina, said bad assets increased 229 percent to $25.7 billion. Problem assets at New York-based Citigroup Inc. rose
128 percent to $27.4 billion, and San Francisco-based Wells Fargo & Co.’s jumped 180 percent to $12.6 billion.
     Goldman Sachs Group Inc. raised $5 billion in an equity offering last week to repay government rescue funds. The New York-based company didn’t disclose comparable nonperforming asset data.
     Investors and analysts have been debating which lenders may require help absorbing losses without full knowledge of how institutions will be judged. U.S. banks have reported more than $550 billion in writedowns, losses and credit provisions since 2007, according to Bloomberg data. Losses at both Citigroup and Wachovia Corp., which was acquired by Wells Fargo, have exceeded $100 billion. Banks have raised more than $400 billion from private investors and the government to guard against loan losses as mortgage defaults surged.

                   ‘Comfortable’ Balance Sheet

     PNC, which reported first-quarter profit of $530 million on April 23, said the increase in nonperforming assets was linked to economic conditions as well as the firm’s acquisition of Cleveland-based National City Corp. at the end of 2008.
    “We’re comfortable with the balance sheet as it is,” PNC Chief Executive Officer James Rohr said in an interview yesterday, adding that the bank isn’t worried about capital adequacy because it is mostly funded through customer deposits.
     “The economy is going to continue to get tougher” and “in this kind of environment you do continue to add to reserves just to be conservative,” he said.
     As banks grapple with increases in bad loans, many are closely watching unemployment and other economic data to get a sense for how many more losses the industry may have to take, said Seamus McMahon, a financial services consultant who works with Booz & Co. in New York.
     “We’re still not out of the woods in terms of how much worse this gets,” he said.