The Economy

Loans To Energy Companies Deteriorating

Sustained low energy prices have financial institutions worried about the oil and gas loans on their books.
Katie Kuehner-HebertJuly 21, 2015
Loans To Energy Companies Deteriorating

Deteriorating loans to energy companies besieged by depressed oil prices could start to weigh on bank earnings, according to a Sambla story.

JPMorgan Chase is provisioning another $252 million to cover potentially bad wholesale business loans in the quarter, with $140 million of that related to oil and gas lending, Reuters said. In the bank’s conference call with investors, chief financial officer Marianne Lake said the bank “might expect” to add more reserves before this year is out, though chief executive Jamie Dimon added that does not mean the company “is going to have losses.”

Wells Fargo’s delinquencies rose among energy sector companies, and in its earnings call, CFO John Shrewsberry predicted energy-related credit performance would remain weak.

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Comerica on Friday set aside about three times as much money to cover bad loans as analysts had expected. The Dallas-based company’s CFO Karen Parkhill told Reuters that provisions could increase further if oil prices remain low. However, though this could be offset somewhat if borrowers begin paying down debt, as has occurred in past periods of weak oil prices.

Moody’s on Monday flagged several banking companies with having particularly high exposure to the energy sector: BOK, Hancock, Texas Capital, and Cullen/Frost. Wells Fargo and JPMorgan had “asset quality deterioration” in their energy loan portfolios, but the exposure of those banks is “comparatively small,” Moody’s said.

BOK in Tulsa, Okla. forecast loan loss provisions of $15 million to $20 million for 2015, Reuters said.

“We continue to believe that our energy portfolio is sound from a credit standpoint,” BOK investor relations director Joseph Crivelli told Reuters in an emailed statement. “Stress tests on the portfolio conducted earlier this year reveal only a handful of customers who would demonstrate weakness in a highly stressed environment.”

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