US large-loan bank losses triple to $53 bn

CHARLOTTE, NORTH CAROLINA: US regulators said total losses from large loans at banks and other financial institutions nearly tripled to $53 billion in 2009, due to a deteriorating economic environment and continued weak underwriting standards.

According to an annual report released by the four federal bank-regulatory agencies on Thursday, credit quality deteriorated to record levels this year.

The report said total identified losses of $53.3 billion in 2009 surpassed last year's total of $2.6 billion, and nearly tripled the previous peak in 2002, when losses totaled $19.1 billion.

``While we expected a year-over-year increase in problem assets, given the weak economic environment, declining (commercial real estate) values, and previously weak underwriting, we were surprised by the magnitude of the increase,'' wrote FBR Capital Markets analyst Scott Valentin in a research note to clients Friday.

Since 2007, banks have been crushed by mounting losses tied to real estate. Rising mortgage defaults since have helped push the US into a recession. While the economic downturn was first pegged to residential mortgage loans, banks and lenders are now having problems with commercial real estate.



The report, called the Shared National Credits Review program, is prepared and jointly released by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Office of Thrift Supervision. The report defines a ``shared national credit'' as any loan or formal loan commitment of at least $20 million that was financed by three or more banks.

Total loans across the institutions reviewed in 2009 was $2.9 trillion. The study looked at 8,955 loans given to about 5,900 different borrowers.

The report said foreign banks held about 38 percent of the $2.9 trillion in loans, while about 21 percent of the loans are held by hedge funds, insurance companies, pension funds and other entities.