B&C Losses Mount For Largest Banks

Earnings reports analysis by global credit rating provider A.M. Best here show that while subprime-related writedowns were prevalent among all banks, losses among the large banks are much higher than among midsize and community banks which feature "more varied" results.

A.M. Best found that consumer mortgages are not the only reason affecting current credit risk issues - instead the biggest factor is "a broader base" of credit risk.

Data show the country's smaller banks "are directly or indirectly facing credit problems with consumer mortgages similar to the largest 200 banks." With the exception of some large states such as Texas, there appears to be "a pattern of distinct regional credit issues," emerging now into the marketplace. These credit patterns, however, according to the report, did not derive from factors underlying the recent market crisis as much as they are "reminiscent of the real estate crisis in the mid-1980s." As to what appears to be the leading factors that have affected credit risk and overall asset quality, A.M. Best said "first-lien mortgages account for most of the non-current, non-accrual and past-due ratios across all banks." In addition, it found that after disregarding the largest 200 banks, "commercial real estate risk is the leading contributing factor to overall credit risk for midsize and small banks." The credit quality of smaller bank portfolios including their multifamily residential and commercial real estate loans are all high-risk. Alaska, Arizona and Arkansas rank as the worst three. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/