Fitch: Credit Pressures Continue To Mount On US Banks

   DOW JONES NEWSWIRES 
 

Fitch Ratings said Friday it expects U.S. banks to continue to operate in a tough environment and be pressured by rising credit costs.

The ratings agency said it doesn't expect negative credit trends to reverse in the near term, especially because of increased concerns related to exposure to commercial real-estate losses. "Further, companies' earnings capacity and their ability to absorb higher credit costs is being eroded by narrowing margins, causing declines in spread income," Fitch added.

Fitch said second-quarter results for the major U.S. banks were mixed and obscured by a number of one-time items and as credit woes weighed on earnings.

It said for major U.S. banks, nonperforming assets more than doubled over the past year and jumped 18% from the first quarter. It cited notable increases at Wells Fargo & Co. (WFC), Regions Financial Corp. (RF) and PNC Financial Services Group Inc. (PNC), which all had increases of more than 30% on a linked-quarter basis.

Problem credits still stem from residential construction, nonprime mortgage loans and high loan-to-value home equity credit, Fitch said, adding the high unemployment rate and prolonged economic downturn "have caused more broad-based weakness in loan quality."

The ratings firm added it saw a positive sign on the credit front in the decline in early-stage delinquencies being reported by many of the banks, though it said the trend could be just a false positive.

-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353; [e-mail]