Oil prices, down more than 20 percent since the beginning of 2016 as of Thursday, fell below $27 a barrel on Jan. 20, the lowest since 2003. [O/R]
Large-cap banks JPMorgan Chase and Co (>> JPMorgan Chase & Co.), Bank of America Corp (>> Bank of America Corp), Citigroup Inc (>> Citigroup Inc), Wells Fargo & Co (>> Wells Fargo & Co), Goldman Sachs Group Inc (>> Goldman Sachs Group Inc) and Morgan Stanley (>> Morgan Stanley) could feel the pinch, although energy loans account for a small portion of their overall portfolios.
Details in the Factbox below are from fourth-quarter earnings reports and comments from CEOs and CFOs in analyst conference calls.
Name of Bank Energy exposure Energy loan Energy loan Comments
as of Dec. 31 loss reserves loss
for Q4 reserves for
FY2015
Bank of $21.3 bln/about $500 mln "As we continue to assess and react to future changes in the
America Corp 2 pct of total energy sector, we could see lumpiness that could potentially
(>> Bank of America Corp) loans drive provision expense over $900 mln."
Citigroup Inc About $58 bln Added about Allowance "If our view changes to one where we believe that oil would
(>> Citigroup Inc) (funded and $250 mln to for loan be at $30 a barrel for a sustained period of time, we would
unfunded) reserves for losses estimate that our full-year cost of credit for 2016 would be
energy in the related to $1 billion" for the institutional clients business.
quarter; $530 funded
mln for the energy loans
year represents
about 3.8
pct of those
loans
Goldman Sachs $10.6 bln In the "In terms of our capital position, I think we're relatively
Group Inc (funded and non-investmen well positioned ... while we're very focused about it, and
(>> Goldman Sachs Group Inc) unfunded) t grade side, are certainly not being complacent about it, we feel pretty
reserves front-footed. Even on a relative basis, we have smaller
run in exposures."
high-single-d
igit
percentages
for that part
of portfolio
JPMorgan Chase $124 mln $550 mln "We said last quarter if oil reached $30 a barrel, and here
& Co (>> JPMorgan Chase & Co.) we are, and stayed there for 18 months, you could expect to
see reserve builds of up to $750 million"
"We are not worried about the big oil companies. These are
mostly the smaller ones that you're talking about these
reserve increases on."
Morgan Stanley About $16 "We've seen an increase in negative marks within our
(>> Morgan Stanley) bln(funded and corporate loan book, focus is around energy."
unfunded) "We are increasing the allowance for loan losses this
quarter. It's up to about $70 mln, clearly a portion which
is energy."
Wells Fargo & $17 bln/less About 7 pct "Current $1.2 billion in loan reserves sufficient if oil
Co (>> Wells Fargo & Co) than 2 pct of of energy stays at $30 in 2016"
loans loans "We are sensitizing our portfolio based on a continuation of
very, very, very low oil prices ... in addition to scenarios
that include an upward sloping curve, and we're comfortable
with the amount of coverage that we have today."
(Reporting by Sruthi Shankar and Ankur Banerjee in Bengaluru and David Henry in New York; Editing by Ted Kerr)