Or are they? Sure, stock prices are high, the highest since 2008 for leading national and regional bank stocks. Earnings for the 7,000 banks tied to the FDIC were up 15.8%. But Gretchen Morgenson looked behind the figures and found some disturbing facts.
The increased earnings were made by only half of the banks. That ratio - about 50% - was the lowest percentage since the last quarter
of 2009. Banks have a fair degree of leeway as to what they estimate their losses from loans will be. This year the amount placed in their loan loss reserves declined by 23% from last year, this is the lowest since early
2007, at the height of the housing bubble. The loan loss reserves were down despite the fact that loans delinquent for 90 days represented 3.41% of all loans. This is a good number when you realize that it had been as high as 5% a few years ago. However, it was less than 1% in 2007.
Despite the record-setting stock market, we are not out of the woods yet.
No comments:
Post a Comment