Nobody was expecting an easy year for U.S. banks, but many observers thought the bulk of the industry's credit troubles would come in the first quarter. Now, it seems the rest of the year may be even worse. Case in point: A May 28 announcement from KeyCorp. Mounting loan losses at the regional bank company suggest the banking industry's troubles with bad loans are just beginning.

 

Submitted: Jun 2, 2008    Views: 94    Comments: 1    Likes: 1   


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Comments Received:

Sam Cass
Sam_Cass

This will only get worse as the Fed is forced to raise rates to combat inflation. The banks massively overlent and now have two issues to deal with:

1. Surviving the losses from garbage loans and the holes blown in their balance sheets. They are already talking about selling Wachovia.

2. Returning to a decent level of profitability. One of the bank's biggest drivers of profitability over the last 10 years is now gone - mortgage and home eq markets.

I believe we are seeing the beginning of a slow deflation of the financial services industry. I saw a stat, maybe posted by you, that financial services now consumed a greater share of the country's GDP than is historically normal.

Posted: Jun 2, 2008



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