Economy May Be Getting Better – For Banks
The financial crisis devastated the finances of just about everyone, most especially banks. Ever since this crisis, banks have done their best to make a dent on the large number of credit card debt and mortgages that American consumers are facing. Efforts spanning several months may already be bearing fruit.
A few of the largest banks in the country have recently seen their bad consumer loans begin to level of. No one is willing to come out and say that recovery is on the way, but optimism is beginning to spread in the industry. Executives from major banks such as Wells Fargo and Bank of America are sounding optimistic and saying that the worst of this economic recession may soon be coming to an end.
As Bank of America made its fourth quarter earnings report, Brian T. Moynihan, who serves as the chief executive of the company said, “Credit quality appears to be stabilizing, if not improving.”
All that optimism is unfortunately limited to banks and other financial institutions. American consumers will not be seeing benefits from the industry’s latest developments any time soon. The huge losses on loans have made banks and financial industries very conservative when doling out loans and credit. In fact, credit flow to consumers have been severely stanched by them and consumers are dealing with a dwindling number of approved loans and tighter underwriting standards. This may be one of the reasons why, in the past few months, rate of losses have begun to moderate.
Howard Atkins, chief financial officer of Wells Fargo believes that, as long as this trend holds, the company’s losses in around half of their 13 businesses in consumer lending will already peak. He also said that, “It is possible — emphasis on the word possible — that consumer losses in total may have already peaked.”
Even with these positive developments, loans that are going sour remain to number quite high. Atkins and a few other experts says that if the economy gets any new bad surprises such as unemployment rising further, this trend could stall or worse, reverse. Banking experts believe that, even though consumer loan losses will see a peak in 2010, losses will still remain high – at least until the general economy and the unemployment rate sees stronger improvements.
Raymond James banking analyst, Anthony Polini, believes that as the second half of the year approaches, it will become more and more important that this general economy sees improvements at a faster rate.
For the moment, however, this economy still remains sluggish, further limiting the ability of consumers to pay off debts.
