Deprcon Warning: U.S. banks

96 U.S. banks fail loan loss stress test

We have run our first loan loss scenario for Q1 U.S. banking data. In it, we assume a 5% loss on commercial and industrial (C&I) loans, 7% loss on real estate (RE) loans, 10% loss on commercial real estate (CRE) loans and a 10% loss on credit card loans. Loan losses in this consensus scenario are based on historical data on recessions and estimates on future losses, which tend to be especially deep concerning the CRE sector.

96 U.S. banks fell into negative equity due to the simulated losses. Worryingly, this is 12 banks more than in our identical stress test run with Q4 banking data. This enforces the view presented by our CEO Tuomas Malinen that the situation in the U.S. banking sector continues to deteriorate, ‘under the surface’. To note, Republic First Bank, which failed in late April, topped our list of U.S. banks to avoid.

From the 96 banks we flag 34 banks with deposit withdrawal warning due to their high exposure to the CRE sector. You find the list of banks below.

We will continue to analyze the U.S. banking data and provide further information on the most vulnerable and the most safe U.S. banks in the coming weeks.

The consensus loan loss scenario