Banks Have Recognized Two-Thirds of Loan Losses

Banks Have Recognized Two-Thirds of Loan Losses

Moody’s Investors Service said this week that U.S. banks have already written off nearly two-thirds of the real estate loans expected to go sour through 2011.

The credit ratings agency projects banks will incur $744 billion of loan charge-offs between 2008 and 2011. Moody’s analysts say an estimated $476 billion of these losses have already been recognized, leaving $268 billion, or 36 percent, remaining.

On an asset class basis, Moody’s estimates 68 percent of residential mortgage losses have been accounted for versus 49 percent of bad commercial real estate loans.

Moody’s says total loan charge-offs have decreased on an aggregate basis for three consecutive quarters and amounted to just 3 percent of bank’s loan holdings in the second quarter of this year – the lowest level since the beginning of 2009, but still near historic highs.

All major categories showed improvement in charge-offs during the second quarter of 2010 with the exception of commercial real estate, which increased modestly…

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