| Deutsche Bank's Mike Mayo Estimates As Much As $400 Billion in Credit Losses for Banks
NEW YORK (AP) - Bad mortgage debt may cost banks as much as $400 billion by the time the credit crisis has run its course, a widely tracked Wall Street analyst wrote in a research report Monday. The major banks have recorded $43 billion in charges stemming from deteriorating mortgage credit quality so far. Plus, they have warned that roughly $25 billion in additional charges are forthcoming. Deutsche Bank analyst Mike Mayo suggested they are perhaps halfway finished. Eventually, the big banks will write off $100 billion to $130 billion, Mayo estimates. .
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.
Secured card a good way to get started in the credit game
With the holiday shopping season upon us you can expect more people to turn to the Internet in search of bargains. But before you do, you really need to have a credit card. Unfortunately, some people can't get one either because they don't have any credit or because they have bad credit. But there's something you can do. Many local banks offer something called a secured credit card, which offers the same safety and security as a regular credit card. That's something you can't always get when you pay with a check or debit card. The amount you can charge on your credit card depends on how much you put into a savings account with the bank. "You would secure your limit with a balance which is tied to your savings account," said Kristel Johnson of Fifth Third Bank.
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.
Quick Money Sunflashes Column
The Bank of Montreal has joined the array of big banks hurt by the U.S. subprime mortgage crash, revealing that it will book half a billion dollars in writedowns partly connected to disorder in world credit markets. The bank said yesterday that $320 million in writedowns come from debt-instrument woes at BMO Capital Markets, and $185 million from the bank's credit card loyalty program. DOUBLE WHAMMY FOR TD Toronto Dominion Bank was hit with a double dose of bad news yesterday. .
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