Wednesday, August 23, 2006

big bank home construction conondrum

guter ansatz. hier wird also mitten im downturn noch massig geld rausgehauen. sind die faulen kredite / bad loans von morgen. besonders marshall&isley ist besonders wagemutig.

A Big-Bank Home-Construction Conundrum
By Richard SuttmeierRealMoney.com Contributor
http://www.thestreet.com/p/rmoney/technicalanalysis/10305418.html

It's not just the smaller regional banks that have increased their exposure to construction lending. So have the big banks. And for those super-regional banks, that means super exposure

Last month I profiled the top eight banks in terms of asset size. This month I am focusing on the top 10 banks in terms of the size of their growing portfolios of construction loans.

A key point I made in my column Tuesday, Construction Loans Weigh on Regional Banks, was that construction loans at publicly trading banking institutions increased by 6.9% to $292 billion in the second quarter of 2006.

That quarter-over-quarter increase in construction lending occurred even as demand for housing has clearly declined. It's important to note that this construction lending, as defined by the Federal Deposit Insurance Corporation (FDIC) statistics, pertains to new-home construction, and not commercial construction.

Many Wall Street strategists still view the huge banks as safe investment plays in anticipation that the Federal Reserve is about to lower rates and orchestrate a soft landing for the U.S. economy.

So far, many of the top banks have performed better than I expected, as second-quarter earnings were boosted by increased real estate exposure resulting in both fee and interest income. In my judgment, this is a double-edged sword, in that increased exposure to real estate financing activities, particularly to construction loans, when housing projects are delayed or stopped before owner occupancy, could lead to delinquencies and, hence, drain loan-loss provisions at even the largest commercial banks.

Profiles of the 10 Lenders
Bank of America has the largest portfolio of construction loans at $20.96 billion, up 1.3% in the second quarter sequentially

BB&T Corp allowed its portfolio of construction loans to grow 7.5% in the second quarter, and it exceeds the FDIC risk-capital-ratio guideline of 100% with a reading of 185%.

JPMorgan is managing its exposure to construction loans with an increase of just 1.3% and is the only bank on today's list that is rated a buy according to ValuEngine

KeyCorp has a construction-loan portfolio of $7.8 billion, up just 3.0% in the second quarter.

Marshall & Ilsley shows a dramatic 27.5% increase in its exposure to construction loans to $7.92 billion in the second quarter from $6.21 billion in the first quarter, and it exceeds the FDIC risk-capital-ratio guideline of 100% with a reading of 171

Regions Bank has a construction-loan portfolio of $10.2 billion, up 6.7% quarter over quarter, and the stock reached a 52-week high of $37.36 on Aug. 4. Regions Bank exceeds the FDIC risk-capital-ratio guideline of 100% with a reading of 129%
Regions has agreed to merge with AMSouth Bank , and shareholders of both banks are scheduled to vote on the deal on Oct. 3; a fourth-quarter closing is expected. ASO has $4.84 billion in construction loans, up 6.4% in the second quarter, and its reading of 97%, on the cusp of the FDIC risk-capital-ratio guideline

SunTrust saw its construction-loan portfolio increase 8.5% to $13.1 billion

US Bancorp has a construction-loan portfolio of $8.59 billion, up just 2.5%,

Wachovia has the second-largest construction loan portfolio at $19.24 billion, up 6.1% quarter over quarter. Wachovia is buying Golden West Financial , which does not underwrite any construction loans. Golden West shareholders will meet on Aug. 31 to vote on the deal, and a fourth-quarter closing is expected.

Wells Fargo has a construction-loan portfolio of $14.71 billion, up 3.3% quarter over quarter

wenn man jetzt noch bedenkt das fast alle naher ihrer 52hochs notieren erklärt das auch die indexstände von dow und sp500.

gruß
jan-martin

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