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;
kerry.benn@dowjones.com