Fitch Says Worst of Credit Storm is Over for US Banks
Fitch Ratings suggests the worst of the credit crisis is over for US commercial banks, though there is still some clean-up to be done.
In its Quarterly Review of the 30 largest US banks, Fitch gives the credit crisis a meteorological workout:
“The long dreaded, broad-based deterioration in consumer asset quality escalated during 2Q08 like the sudden movement of a tropical storm. Much like weather forecasts and storm warnings, no matter how many dire predictions before the storm, the reality of the storm’s destruction and devastation always seems to take everyone by surprise. In common with the high winds at the leading edge of the storm; loan loss provisions do the most damage and make the most noise. Similarly the increases in non-performing loans and net charge-offs are much like the collateral damage that takes months and, in some cases, years to fully clean up and rebuild.”
“That said, one silver lining is that the infrastructure constructed after a natural disaster is typically built stronger and more durable. The real question is whether the U.S. banks are weathering the trailing edge winds or merely getting ready for the eye of the storm.”
Fitch believes that while this storm lingered over land longer and did more damage than the storm chasers initially thought, it appears that the winds may be dying down.
“Looking beyond 3Q08, the banks clearly face the arduous task of cleaning up the mess, which could take a while. To be sure, there will be the occasional gust and perhaps meaningful levels of rain still to come but it is no longer a Category 5.”
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