Loss Reserves hitting bank balance sheets

Posted on July 19, 2012


Under bank regulations, banks are required to set reserves against losses for defaulting mortgages (and other bad debt, mostly most mortgages….).  With the Q2 earnings posting last week and this week, these loss reserves are leading the headlines for the major banks. It’s interesting to see the difference of opinion on how to account for these losses (ie. Citi’s approach vs Wells Fargo):

Capital One: http://www.businessweek.com/news/2012-07-18/capital-one-profit-plummets-on-one-time-reserve-build

Citi: http://www.housingwire.com/news/citigroup-reluctant-shrink-reserves-against-mortgage-portfolio – “standing firm on loss reserves…”

Wells Fargo: http://www.housingwire.com/news/wells-fargo-boosts-mortgage-repurchase-provisions-q2 –  “strengthened loss reserves…”

Bank of America: http://dealbook.nytimes.com/2012/07/18/bank-of-america-2nd-quarter-profit-of-2-5-billion-beats-estimates/ (today) – “put-back claims totaled $22.7 billion in the second quarter…”

Chase: http://www.housingwire.com/news/chase-mortgage-profits-swell-harp-slower-buybacks-0 (last week) – “repurchase losses shrinking…”

PNC: http://www.reuters.com/article/2012/07/18/us-pncfinancialservices-results-idUSBRE86H0OF20120718 (today) – “set aside more money for residential mortgage loan repurchases and said it expects the so-called “put-back” requests to increase…”

BB&T: http://www.reuters.com/article/2012/07/19/us-bbtcorp-results-idUSBRE86I0KC20120719

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