| BI warns of higher consumer loan risk
The central bank has warned of a rising risk from consumer loans amid the recent rise in total bank lending, which has already exceeded its 22 percent growth target for this year and is expected to add another 25 percent next year. Bank Indonesia director for banking research and regulations Halim Alamsyah said Monday more consumer loans could face default if household income weakens, with banks themselves facing regulatory constraints to resolve the potential bad debts. "We've noticed an increase in the non-performing loan (NPL) level of consumer loans, particularly from credit cards," Halim said at a financial stability discussion. "And banks cannot simply write off these bad debts, as this has regulatory implications regarding their financial reporting and taxation." Halim did not elaborate on the current NPL level in the consumer sector, but according to data from Bank Indonesia, as of the end of September it reached Rp 8.7 trillion (US$950 million) -- or 3.2 percent of total consumer loans.
Local lenders' business loans going bad
Bad loan writeoffs are surging at Chicago banks, a sign that housing market troubles are spreading to small and mid-sized businesses. The area's second- and third-largest banks LaSalle Bank N.A. (now owned by Bank of America Corp.) and Harris N.A. wrote off business loans through Sept. 30 at more than twice the rate of last year, according to financial statements. As a group, the 15 largest local banks that disclose Chicago-specific data wrote off $84.3 million in business loans, about double the figure for the first three quarters of 2006. Although loans to commercial real estate developers took a turn for the worse early this year, lending to other businesses has been seen as safe. The writeoffs haven't reached levels that dent banks' earnings, but many bankers expect credit quality to further deteriorate this year and well into 2008 as the economy continues to soften.
Crunch time
November 16 � Financial Times (Gillian Tett): �Another week, another memorable encounter with a nervous financial beast. This time, however, the animal in question is Royal Bank of Scotland�Last week, RBS raised eyebrows when it was widely reported that one of its highly respected credit analysts had predicted that
subprime losses could eventually rise to between $250bn and $500bn - or twice previous estimates� behind the scenes - and occasionally in public view - the credit analyst community remains distinctly divided about just how big the final hit might be� Thus while some observers project a $100bn hit, others talk about $500bn� A decade ago, I covered the Japanese bank crisis and became embroiled in a bad-loan guessing game that continued for many years.
Stocks skid again; investors on edge as Wachovia takes writedown, economic worries persist
NEW YORK (AP) — Wall Street finished a turbulent week with another huge drop Friday after major banks warned of further losses on their debt portfolios, raising investor concerns that the credit market slump shows no sign of abating. The Dow Jones industrial average fell more than 220 points.Bank of America Corp., JPMorgan Chase & Co. and Wachovia Corp. all said the ongoing credit crisis will cause another round of heavy losses during the fourth quarter. Financial institutions took big hits during the last quarter as losses from subprime mortgages hurt their balance sheets, and these three companies were just the latest to report bad news that sent stocks lower.BofA said continued "market dislocations," including those related to securities it owns that are backed by loans, will affect its fourth-quarter results.
Asian currencies mostly down against dollar
Asian currencies ended the week mostly down amid global credit market worries, though the yen continued to make gains and hovered near an 18-month high against the greenback. Japanese yen : The yen has hovered around an 18-month high against the dollar in the past week as investors shunned risk amid credit market concerns and worries the US economy was losing momentum. The Japanese currency rallied to the week's high of 109.22 to the dollar on Tuesday and stood at 110.08-11 to the dollar in Tokyo late Friday, up from 112.65-68 to the dollar a week earlier. Thomson IFR analyst John Noonan said: "The markets remain nervous, with fears of more bad news to come from the credit markets dominating sentiment." Commerzbank currency trader Ryohei Muramatsu saw no imminent end to a liquidity squeeze from the US subprime loan crisis.
Asian stocks battered on Wall Street's plunge
SINGAPORE: Asian stocks were weaker again early Tuesday as investors took their lead from the gyrations in US equities and dumped bank shares amid worries that the financial sector will be hit by further credit losses. Analysts say broad caution should persist before the minutes of the most recent Federal Open Market Committee meeting are released later in the day. US government-chartered housing-loan agency Freddie Mac is set to release its third-quarter earnings later as well, and investors will be watching for details on how the mortgage and mortgage-backed securities market have affected the company. Also, there is this week's US Thanksgiving Day holiday to keep investors on their toes. With conditions in money markets again tightening and players bracing for more bad news on the credit front, regional stocks were taking their lead from the 218.35 point (1.7%) fall in the Dow Jones Industrial Average overnight.
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