Rough Banking Seas Ahead?

[Non Sequitur]

Not sure how long banks can extend and pretend with their CRE portfolios but I’m starting to see third modification agreements on the residential side. Guess we’ll see soon enough if the hammer comes down after the election.

 

[Terrel L. Shields]

 

[OSU Beavers]

JPMorgan Chase, Wells Fargo and Bank of America Lose $5,000,000,000 in Push To Offload Rotten Debt As Credit Card Delinquencies Surge - The Daily Hodl

US banks are increasingly offloading billions of dollars in bad debt that they've officially given up on collecting, according to new numbers from the Federal Deposit Insurance Corporation (FDIC).

dailyhodl.com

 

[Terrel L. Shields]

One reason banks are not foreclosing on more properties is because they want to keep those numbers 'off the books'. It is also why they are holding tens of thousands of repo'd cars in auction lots and not selling but POing (Pass out) the sales because the offers are much less than the mortgage balance. That avoids writing down those loans which comes directly upon their top number. They are valuing these autos at the outstanding loan balance. At some point, the regulators and examiners will be requiring them to sell...regardless cost and then it will be a bloodbath.

 

[OSU Beavers]

One reason banks are not foreclosing on more properties is because they want to keep those numbers 'off the books'. It is also why they are holding tens of thousands of repo'd cars in auction lots and not selling but POing (Pass out) the sales because the offers are much less than the mortgage balance. That avoids writing down those loans which comes directly upon their top number. They are valuing these autos at the outstanding loan balance. At some point, the regulators and examiners will be requiring them to sell...regardless cost and then it will be a bloodbath.

He said "Bloodbath"!!!

 

[Non Sequitur]

I follow a professor on LinkedIn, he posts bank CRE stats quarterly (see attachment). And I ran across another post on LinkedIn, a financial advisor commented on the Bank of the OZK's recent earnings call:

"As soon as you need to convince everyone that you are ok, things are not ok...snip...Quick look at the figures: Market capitalization of OZK is just shy of $5bln and the commercial real estate loan book of approximately $33bln (to put it in context Lehman had $23bln at its bankruptcy).

And the largest concentration of loans is in Miami, a market that has been highlighted for its slowdown."

Per the chart below Bank of the OZK's CRE to total equity is 596.8%. To put that in perspective, in past regulatory environment a general guide of risk looks something like: Over 500% outright failure territory; over 400% forced marriages; over 300% dilution, management change (orderly or forced) territory. But here we are, kicking the can down the road.

 

[DTB]

I follow a professor on LinkedIn, he posts bank CRE stats quarterly (see attachment). And I ran across another post on LinkedIn, a financial advisor commented on the Bank of the OZK's recent earnings call:

"As soon as you need to convince everyone that you are ok, things are not ok...snip...Quick look at the figures: Market capitalization of OZK is just shy of $5bln and the commercial real estate loan book of approximately $33bln (to put it in context Lehman had $23bln at its bankruptcy).

And the largest concentration of loans is in Miami, a market that has been highlighted for its slowdown."

Per the chart below Bank of the OZK's CRE to total equity is 596.8%. To put that in perspective, in past regulatory environment a general guide of risk looks something like: Over 500% outright failure territory; over 400% forced marriages; over 300% dilution, management change (orderly or forced) territory. But here we are, kicking the can down the road.

Short interest is getting up there as well. Maybe time for me to put a stop order in place.

Thanks for the info!

 

[BRCJR]

One reason banks are not foreclosing on more properties is because they want to keep those numbers 'off the books'. It is also why they are holding tens of thousands of repo'd cars in auction lots and not selling but POing (Pass out) the sales because the offers are much less than the mortgage balance. That avoids writing down those loans which comes directly upon their top number. They are valuing these autos at the outstanding loan balance. At some point, the regulators and examiners will be requiring them to sell...regardless cost and then it will be a bloodbath.

They are supposed to value the vehicle at market, within a short period of time, after acquiring the vehicle.

They are skirting the regs when valuing at the loan balance.

They are not wanting to "right them down" and put money in loan loss reserve if more is owed than valuation opinion..

 

[Terrel L. Shields]

They are supposed to value the vehicle at market,

We had another bank failure this past week

https://www.FDIC.gov/bank-failures/...r 18, 2024,a financial institution is closed.

 

[BRCJR]

We had another bank failure this past week

https://www.FDIC.gov/bank-failures/...r 18, 2024,a financial institution is closed.

I heard today the World Bank "lost" 4 billion dollars. Not in loan loss but they cannot find the money.

The USA owns about 16% of the World Bank, I believe.