The American Banker, February 14, 2002
Copyright 2002 American Banker, Inc. The American Banker February 14, 2002, Thursday SECTION: WASHINGTON; Pg. 3 LENGTH: 464 words HEADLINE: $17B of Trouble for Top 25 Banks BYLINE: BY BARBARA A. REHM DATELINE: WASHINGTON BODY: The 25 largest banks still have $16.6 billion, or nearly 5% of their equity capital, exposed to 2001's two biggest credit problems -- Enron Corp. and Argentina -- according to a report released Wednesday by the Federal Deposit Insurance Corp. Loans to the collapsed energy trader and the South American country made up nearly half the banks' nonperforming assets, which on Dec. 31 were $35.3 billion, or 9.69% of equity capital, the FDIC said. Of those 25 largest banks, 11 blamed Enron or Argentina for fourth-quarter hits. Net chargeoffs by the 25 were up 64% in the fourth quarter, to $3.4 billion, from a year earlier. The FDIC said 30% of the net chargeoff total could be traced to either Enron or Argentina. Asked to divide the remaining loss exposures, FDIC researcher Warren G. Heller said that both Citigroup Inc. and FleetBoston Financial Group are still exposed to $6 billion of losses in Argentina, while J.P. Morgan Chase & Co. has the largest exposure to Enron, at $2.06 billion. Nonperforming assets rose 25% at the 25 banks last year. The five at which they equaled the most equity capital were Bank One Corp. (18.23% of equity capital), KeyCorp (15.07%), UnionBanCal Corp. (13.89%), Comerica Inc. (13.04%), and Citigroup (12.33%), according to the FDIC. Fourth-quarter additions to loan-loss reserves held by the 25 banks totaled $11 billion, up 32.1% from the third quarter. Provisions outstripped chargeoffs by nearly $2.2 billion, according to the FDIC, but the ratio of reserves to nonperforming assets declined to 138% from 143%. Still, the FDIC noted that the equity capital and reserves held by the 25 are more than 11 times total nonperforming assets. Moving beyond the numbers, Mr. Heller noted that "adverse events often highlight areas for reform" and said that Enron and Argentina may require "better anticipation and monitoring of overseas exposure, as well as more rapid collection of current and forward-looking domestic banking data." Last week an American Banker story took a look at much of the same data for the 10 largest banks. It quoted the Office of the Comptroller of the Currency's credit czar, David D. Gibbons, as saying that credit quality problems tend to peak six to nine months after an economic recovery begins. In his report, Mr. Heller sees a slightly longer time horizon. "A 12-to-15-month period often separates the end of a recession and peak loan writeoff activity at banks," he wrote. The FDIC report includes many other details about the 25 largest banks, which hold 62% of the industry's total assets. The results can be found on the agency's Web site at http:// www.fdic.gov/bank/analytical/fyi/fyi021302.html. Copyright c 2002 Thomson Media. All Rights Reserved. http://www.americanbanker.com LOAD-DATE: February 13, 2002 Stephen F. Diamond School of Law Santa Clara University [EMAIL PROTECTED]
