Banks Could See Boost as Reserves Released

Philip van Doorn TheStreet.com September 1, 2010

NEW YORK (TheStreet) -- Following the Federal Deposit Insurance Corp.'s report on the banking industry's best quarterly earnings performance in nearly three years with releases of loan-loss reserves making a major contribution to the bottom line, TheStreet has prepared a list of large banks and thrifts with reserve coverage greatly exceeding the pace of loan losses.

TheStreet previously examined how the release of loan-loss reserves drove earnings in the June period for several of the nation's largest holding companies. There's no perfect way to measure the adequacy of loan-loss reserve coverage. One method is to look at the ratio of loan-loss reserves to nonperforming loans. The problem with that method is that it doesn't reflect writedowns that banks may already have taken on their nonperforming loans. Another is that credit card lenders tend not to hold problem loans on the books, quickly charging them off instead. Another way to gauge reserve adequacy is to look at the annualized pace of net charge-offs -- loan losses minus recoveries -- and compare that to the ratio of loan-loss reserves to total loans. The problem with this method is that a bank with a high level of nonperformers won't be charging them off at an even pace. Using second-quarter data for the banks themselves, the following list includes the 10 banks and thrifts among the largest 50 U.S. institutions whose ratios of loan-loss reserves to total loans exceed their annualized second-quarter net charge-off ratios by the highest amounts: All 10 banks were profitable during the second quarter and all had total risk-based capital ratios greatly exceeding the 10% required for most banks to be considered well capitalized by regulators. Subsidiaries of the largest U.S. bank holding companies, including Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) are on the list, emphasizing that the releases of loan-loss reserves are likely to continue boosting earnings over coming quarters. Wells Fargo Bank South Central, NA of Houston is the nation's 43rd largest bank or thrift according to second-quarter call report data provided by SNL Financial, although its $36.9 billion in total assets make it a rather small piece of parent Wells Fargo & Co., which had $1.2 trillion in total assets as of June 30. Add Comment Tweet 1 2 Last » Next › var OutbrainPermaLink='http://www.thestreet.com/story/10850008/banks-could-see-boost-as-reserves-released.html'; var OB_Template = "thestreetcom"; var OB_demoMode = false; var OBITm = "1276003897985"; var OB_langJS ='http://widgets.outbrain.com/lang_en.js'; if ( typeof(OB_Script)!='undefined' ) OutbrainStart(); else { var OB_Script = true; var str = ''; document.write(str); } adsonar_placementId=1341527;adsonar_pid=879768;adsonar_ps=-1;adsonar_zw=600;adsonar_zh=280;adsonar_jv='ads.adsonar.com'; Featured Photo Galleries var galljs = document.createElement('script'); galljs.src = 'http://js.thestreet-static.com/files/tsc/v2008/js/_1283300280100/min/pages/gallery.js'; var head = document.getElementsByTagName('head')[0]; head.appendChild(galljs); Go to Slideshow Archive TheStreet Premium Services Compare All Services Jim Cramer's Action Alerts PLUS: Now any level of investor can trade right alongside a Wall Street pro — and enjoy 24/7 access to his portfolio! Learn More Login RealMoney Silver: Get Doug Kass's exclusive trading diary + 5 of TheStreet's top premium services including Action Alerts PLUS and RealMoney — all on one streamlined page. Learn More Login Stocks Under $10: Break into the market with small- and mid-cap stocks... all $10 or less! David Peltier tells you exactly which low-priced stocks he's buying and selling. Learn More Login OptionsProfits: Get 50+ trade ideas a week from the industry's top options experts. Plus — exclusive commentary on market trends and essential trading tools. Learn More Login Breakout Stocks: Find tomorrow's household names today. Bryan Ashenberg finds hidden gems in exciting up-and-coming markets that he believes are ready to break out! Learn More Login RealMoney Portfolio PLUS ETF Action Daily Swing Trade Market Movers ETF Shark Alerts TheStreet Ratings Top Gun Trader Top Stocks try { function DM_onSegsAvailable(segs, cust_id) { for(var i=0;i Dow Jones S&P 500 NASDAQ 10-Year Note 10,236.02 1,077.50 2,169.73 25.78 Oil * 76.33 UP 221.30 UP 28.17 UP 55.70 UP 1.01 10 Yr 2.58% SPDR Gold 121.71 +2.21% +2.68% +2.63% +4.08% Data delayed 20 minutes Latest Trade Alerts See all function renderFeedContent(data){ for(var i=0; i < 2; i++){ document.write('' + data[i].headline +''); document.write('' + data[i].productName+' ($) - ' + data[i].publishDate + ''); document.write('

'+ data[i].callout +'

'); } } //* Global Functions *// function metadataRegisterNS(ns){ var nsParts = ns.split("."); var root = window; for(var i=0; i adsonar_placementId=1341369;adsonar_pid=879768;adsonar_ps=-1;adsonar_zw=320;adsonar_zh=280;adsonar_jv='ads.adsonar.com'; Brokerage Partners YAHOO.util.Event.on(window,"load",function(){ setTimeout(function(){ TSCM.util.attachScript('scr_intellitxt','http://thestreet.us.intellitxt.com/intellitxt/front.asp?ipid=10685'); },1200); }); document.write(unescape("%3Cscript src='" + (document.location.protocol == "https:" ? "https://sb" : "http://b") + ".scorecardresearch.com/beacon.js' %3E%3C/script%3E")); var beaconurl=""; if(TSC.util.isDefined(document)){ beaconurl=document.URL; try{ if (top.location != self.location){ beaconurl=document.referrer; } }catch(e){} } COMSCORE.beacon({ c1:2, c2:"6036014", c3:"", c4:beaconurl, c5:"", c6:"", c15:"" }); var pvar = { cid: "us-thestreet", content: "tsc", server: "secure-us" }; var trac = nol_t(pvar); trac.record().post(); Free Newsletters from TheStreet

After the Bell

Before the Bell

Booyah! Newsletter

ETF Daily

Midday Bell

TSC Top Ten Stories Newsletter

Winners & Losers

We respect your privacy. Manage Newsletters Podcasts [Select Podcast] The Real Story Wall Street Confidential Podcast Daily RSS Updates

TheStreet Mobile Edition

Connect with TheStreet

YAHOO.util.Event.on(window,"load",function() { try { var loginlink = YAHOO.util.Dom.get("logonoff"); var cookie = new UserStatus().streetCookie; if(cookie.indexOf('|')== -1){ loginlink.setAttribute("href",""); loginlink.innerHTML = "Log In"; } } catch(e) {} }); TheStreet Corporate | Home | About Us | Advertise | Customer Service | Employment | Privacy Policy | Sitemap | Topic Archive | Terms of Use document.write('

Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Terms & Conditions. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

*Oil Data in Market Overview is Brent Crude Pricing

'); TSCM.ads.AdPlacerx.sz = "728x90"; TSCM.ads.AdPlacerx.resetTargets(); TSCM.ads.AdPlacerx.calltype = "adj"; TSCM.ads.AdPlacerx.includeDcopt = true; TSCM.ads.AdPlacerx.additionalTargeting = ";;storytype=financial-services;kval=financial-services"; TSCM.ads.AdPlacerx.writeTag(); TSCM.ads.AdPlacerx.sz = "336x280,336x850,300x250,468x648"; TSCM.ads.AdPlacerx.resetTargets(); TSCM.ads.AdPlacerx.calltype = "adj"; TSCM.ads.AdPlacerx.additionalTargeting = ";;storytype=financial-services;kval=financial-services;;storytype=financial-services;kval=financial-services"; TSCM.ads.AdPlacerx.writeTag(); TSCM.ads.AdPlacerx.sz="336x280,300x250"; TSCM.ads.AdPlacerx.resetTargets(); TSCM.ads.AdPlacerx.setSite("remnant.thestreet.com"); TSCM.ads.AdPlacerx.additionalTargeting=";box=second"; TSCM.ads.AdPlacerx.calltype="adj"; TSCM.ads.AdPlacerx.writeTag(); /** * function wrapper that places all DART ads using TSCM.ads.positionToPlaceholder * if positionToPlaceholder can't find the elements specified, it just returns and is ready for the next call */ TSCM.ads.placeLazyLoadingAds = function() { // DART 1 (banner) TSCM.ads.positionToPlaceholder({ ad: 'ad728x90', placeholder: 'bannerContainer', flexibleHeight: false }); //DART 2 TSCM.ads.positionToPlaceholder({ ad: 'customUnit', placeholder: 'cauContainer', flexibleHeight: true }); //DART 3 TSCM.ads.positionToPlaceholder({ ad: 'boxAd', placeholder: 'boxAdContainer', flexibleHeight: true }); //DART 4 TSCM.ads.positionToPlaceholder({ ad: 'secondBoxAd', placeholder: 'secondBoxAdContainer', flexibleHeight: false }); }; TSCM.ads.placeLazyLoadingAds() window.setTimeout(function() { TSCM.ads.placeLazyLoadingAds() }, 2000); window.onresize = function() { setTimeout(function() { TSCM.ads.placeLazyLoadingAds(); }, 1000); }; YAHOO.util.event.onDOMReady( YAHOO.util.Dom.setStyle("lazyLoadedObjects", "visibility", "visible") ); var disqus_shortname = 'thestreet'; (function () { var s = document.createElement('script'); s.async = true; s.src = 'http://disqus.com/forums/thestreet/count.js'; (document.getElementsByTagName('HEAD')[0] || document.getElementsByTagName('BODY')[0]).appendChild(s); }()); /* */ NM_SmartSite_ID = '1001'; BF_BB_DATA = null; (function( ){ document.write(''); var sid="76IOF7"; var c=""; var b=""; BF_BB_SCRIPT=document.createElement('script'); BF_BB_SCRIPT.type="text/javascript"; BF_BB_SRC="http://buzzbox.buzzfeed.com/wd/BuzzBox?sid=" + sid + c + b + '&it=1&cb=' + (new Date()).getTime(); setTimeout(function() { document.getElementById('BF_BUZZBOX').appendChild(BF_BB_SCRIPT); BF_BB_SCRIPT.src=BF_BB_SRC; },1); })();