Friday, December 09, 2011

Bank Business Loan Charge-Off Rates Returning to 2007 Levels, Bank Failures Lowest Since 2008


The two charts above provide some evidence that the U.S. banking sector is recovering from the effects of the Great Recession and financial crisis of 2008-2009. 

Charge-off rates for all commercial banks are displayed in the top chart, and show that:

a. Business loan charge-off rates, at 0.73% in Q3, are the lowest in 14 quarters (since 0.71% in 2008 Q1) and have now almost returned to the pre-recession levels. 

b. Real estate loan charge-off rates fell in Q3 for the seventh consecutive quarter to 1.41%, the lowest quarterly rate since 2008 Q3. 

Annual bank failures are displayed in the second chart and show that:

a. Bank failures through mid-November of this year are at 90 institutions, and will likely be the lowest since 2008, and down significantly from 157 last year, and 148 in 2009. 

b. Compared to the nearly 3,000 banks that failed during the S&L crisis, the 425 bank failures since 2008 are relatively small in comparison.  

Although there is more progress ahead necessary to completely restore the health of the U.S. banking system to its pre-recession level, there is lots of evidence that confirms that the worst is definitely behind us. 

4 Comments:

At 12/09/2011 4:12 PM, Blogger Benjamin said...

More good news. The Fed has it wide open to blow this economy into a boom..I guess they are waiting for Romney.

 
At 12/09/2011 4:48 PM, Blogger VangelV said...

Charge-off rates for all commercial banks are displayed in the top chart, and show that:...

If I underestimate the charge-off rates I can prop up my share price even if I have to take a big write off later. Better to be bailed out later than to decrease shareholder equity today and miss out on a bonus payment. The wife wants a new house and the mistress wants a better apartment.

Real estate loan charge-off rates fell in Q3 for the seventh consecutive quarter to 1.41%, the lowest quarterly rate since 2008 Q3.

Expect to see a few bank closures related to CRE in the next few months. Things are not looking all that good.

a. Bank failures through mid-November of this year are at 90 institutions, and will likely be the lowest since 2008, and down significantly from 157 last year, and 148 in 2009.

You can thank the FASB rules for that. If the banks had to value their holdings properly you would be looking at a wave of failures that would include most of the biggest American financial institutions. What I find it ironic is that the financial system was ruined by the Basel Accord regulations that were supposed to keep it safe but a supposedly free market advocate like you has said nothing about it.

 
At 12/09/2011 5:53 PM, Blogger Chance said...

How about the failures by inflation adjusted assets mid 80s versus now?

 
At 12/10/2011 2:07 PM, Blogger Pitchman said...

I love this blog but is this April first?

FASB suspended rules and shadow inventory should push you to present such information with extreme caution! But hey the Kool Aid tastes great.

This fluff without an explanation of the true nature makes the piece a hack-job and could cost your readers financial hardship.

http://notionalvalue.blogspot.com/

 

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