Sometimes a few charts say more than a thousand words …
(ALLL = Allowance For Loan and Lease Losses)
All these charts ultimately tell us :
– Banks continue to face an ocean of non performing loans
– But these non-performing loans are outpacing their ability to up the allowance for future losses
– Net loan charge offs are way past record highs and continue to shoot higher
– Return on bank assets and equity is approaching negative territory – still way too many resources are tied up in the banking sector
There is no recovery, not in banking anyway. Why? Because they made too many loans and are still facing the bitter reality that many of those will never be paid back. But why won’t they recover as a result of the recent bailout and stimulus efforts? Because those aimed at getting banks to loan out more money … which is the cause, not the cure of their predicament.
There are many more bank failures, write offs, charge offs, and foreclosures ahead of us before we can truly speak of a recovery. Especially if we keep postponing and dragging this process out from month to month.
It’s the policies from The Great Depression all over again.