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Banks Speed Up Distressed Debt Charge-Offs May 01
Standard & Poors, May 2001
Abstract
Determined to limit the damage from distressed debt as the economy weakens, a growing number of banks are more actively managing their loan portfolios. 'There's a new twist in the credit cycle, with banks proactively selling off their distressed loans and taking the losses earlier,' observed Tanya Azarchs, managing director in Financial Services Ratings at Standard & Poor's. Bank One, for example, sold $375 million in nonperforming loans in the first quarter of 2001, enabling it to limit nonperformers to 1.55% of the bank's entire loan portfolio. That figure would have been 1.77%, or 14% higher, if the bank had retained these loans (see table). A corollary to the reduced percentage of nonperformers is that the level of net charge-offs...
Companies mentioned in this report are: Bank of America Corp.,Fleet National Bank,FleetBoston Financial Corp.
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
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