Early Look at Q3 2009 Preliminary Bank Stress Test Ratings Show Improvement
As of today, our automated tool to gather FDIC bank call reports and generate Stress Index ratings has gathered data on some 5,063 institutions. Users of the professional version of the IRA Bank Monitor can see the ratings on a list we have built on the Bank Monitor home page that is sorted by assets. The largest institution CALL reports in so far start with the Ally Bank unit of GMAC, followed by a unit of Toronto Dominion Bank (NYSE:TD).
Perhaps most important is the fact that the overall level of observed stress in the industry is not rising significantly. You can see the public widget we have built that shows the preliminary ratings for the current quarter and the final ratings for the past quarter by clicking here. One of these days, when Barry actually joins our affiliate program, we are going to build him some little toys using our web technology for visitors to The Big Picture theme park.
The current bank stress index for the smaller banks in the US banking industry is 6.45 vs. 1 for the benchmark year of 1995. Being more than half an order of magnitude above the mean for banking stress is not good. But given that the preliminary rating in Q2 2009 was 6.7, this when we had about 7,000 bank CALL reports available, the overall message from the Stress Index is that levels of pain in the banking industry are about where they were in Q2 2009. You can read our public comment about the Q2 2009 ratings in the Institutional Risk Analyst.
While it is possible that the overall level of industry stress could rise or fall as we see the rest of the FDIC bank units report for Q3 in the next three weeks, we think that this preliminary result confirms the general trend in the industry toward moderating loss rate increases. Since only the 19 Stress Text banks were really under pressure to window dress Q3 results for compliance purposes with the Fed’s SCAP stress tests, the inference we draw is that the rate of change in terms of stress throughout the industry was likewise more moderate in Q3.
Chris
November 5th, 2009 at 3:26 pm
“”While it is __possible__ that the overall level of industry stress could rise or fall as we see the rest of the FDIC bank units report for Q3 in the next three weeks, we think that this __preliminary__ result confirms the general trend in the industry toward moderating __loss__ rate __increases__.”
__ emphasis mine.
A more non commital paragraph about bank capital positions is hard to imagine.
November 5th, 2009 at 3:27 pm
Regarding banks, my prediction is that they will follow Fannie into operating real estate.
http://www.chartsandcoffee.com/2009/11/fannie-mae-to-rent-foreclosed-homes/
November 5th, 2009 at 3:38 pm
Banks are operating real estate now. And yes, non-committal until I get to 7,000 units. Some of the biggest players in the industry are still out. That said, the good news is that the small-bank results don’t start with a “7″
November 5th, 2009 at 3:39 pm
The banks can be the new slum lords! But why would anyone who’s living rent or mortgage-free agree to even pay rent at this point if they can just sit tight and enjoy a free roof over their heads?
November 5th, 2009 at 5:43 pm
Fannie Mae posts $18.9 billion Q3 loss, taps Treasury
22 mins ago
NEW YORK (Reuters) – Fannie Mae, the largest provider of funding for U.S. home loans, on Thursday said it would again tap the Treasury to plug a net worth deficit after bad mortgages and foreclosure prevention efforts resulted in a $18.9 billion net loss in the third quarter.
Shares of Fannie Mae tumbled 7.1 percent after it reported results in extended after-hours trade.
Fannie Mae (FNM.P) (FNM.N) , which was seized by the government last year, said the quarterly loss stemmed from $22 billion in credit-related expenses, including charges on impaired loans it bought from mortgage-backed securities as it modified loans under President Barack Obama’s foreclosure prevention plan.
The company also boosted its provision for credit losses in future quarters.
Fannie’s regulator will request $15 billion from the Treasury under a senior preferred stock agreement, which will increase the total government support to $60.9 billion.
November 5th, 2009 at 6:23 pm
People talk about bailouts. What nobody talks about is that the government effectively took over most of the RMBS market years ago. This isn’t a new problem. It didn’t take a genius to know that concentrating all the mortgages into one entity without market forces limiting the GSEs ability to fund mortgages would be a disaster.
There is nothing worse than taking communism and capitalism and mixing them together. This is a textbook result.
RMBS is one example of why we are going nowhere. The same structure of the government owning 50%+ of the mortgages in this country is still in place. Now they’ve expanded the FHA program since borrowers can’t even meet Freddie/Fannie guidelines.
An analogy would be refusing to cut out a tumor that could cure a patient and instead providing the patient expensive drugs to limit the disease. Of course the patient ends up dying after spending years of pain taking expensive drugs. Instead, the tumor could just be cut out and with therapy the patient could move forward and get stronger.
CC
http://www.chartsandcoffee.com
November 5th, 2009 at 7:00 pm
LOL come on why post such nonsense. just look at what fnm has just proposed. this is simply an attempt to hide the balance sheet and forestall inventory. when are people going to wake up. things have deteriorated not gotten any better since oct 2008. why in god’s name are we propping up assets that are destined to fall much further. when will anyone in this banana republic reALIZE WE ARE JAPAN. they said japan could not happen here. well it’s here and far worse. can anyone total the losses on MAIDEN LANE?
November 6th, 2009 at 9:43 am
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