KBWB - Banking Sector: Warning Signs Flashing

2024-06-08 04:50:17 ET

Summary

• The level of unrealised losses for banks has increased, indicating trouble in the sector.
• Commercial real estate is facing severe problems, which will be aggravated by high-interest rates.
• Disruptions in global trade routes and the trend towards de-dollarisation could contribute to inflationary pressures.

Preamble

Back in February 2023, I penned an article titled; “ Banking Sector: Storm Clouds Are Gathering ”. The piece outlined, amongst other things, data from the FDIC quarterly report of the time. Following the article a few regional banks went belly up for reasons explained therein. It would appear that further signs of trouble are appearing on the horizon.

Having just read the latest quarterly bulletin from the FDIC, things are not exactly rosy in the garden for the banking sector. In particular, to quote; “The number of banks on the Problem Bank List, those with a CAMELS composite rating of “4” or “5,” increased from 52 in fourth quarter 2023 to 63 in first quarter 2024.”...

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