Editor’s Note: I have noticed many “For Lease” signs around downtown. This can not bode well for the owners of these buildings. According to this article, they have an estimate that the default rate could double this year alone, jumping to 3.8%. I did also notice that many of the banks the analysts are watching cautiously, are smaller regional banks that are of the same size as the ones we keep reading about every Friday when another banks gets seized by the FDIC. This will continue but I do think we will see a bailout package for refinancing these notes coming due.
News (CNN Money):
Banks’ losses on loans to businesses will get much worse than investors expect within the next six months, according to an analyst report Monday that said it’s still too early to buy bank stocks.
Losses on business loans should grow much larger during the next six months than they were during the previous two recessions and could peak in a “kitchen sink” of bad news during the fourth quarter, a team of Friedman, Billings, Ramsey & Co. analysts led by James Abbott wrote in a research note.
“We believe we are only in the very early stages of the business losses,” the FBR analysts wrote.
Analysts who are bearish on the banking sector have been warning for some time that a wave of losses in business loans would follow the increasing deterioration in residential mortgages and consumer loans.
Abbott’s team has been watching for cracks to appear in business loans since just after the financial crisis began in the fall of 2007. In June of last year, they issued a report saying there was a “false sense of security” around business loans, and predicting that business loan losses would emerge as a second act to the credit crisis before losses in consumer loans had peaked.
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