U.S. regional banks brace for losses from energy loans

Fri Apr 22, 2016 2:28pm EDT
 
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By Sweta Singh and Sruthi Shankar

(Reuters) - The five U.S. regional banks most exposed to the energy sector set aside millions of dollars more in the first quarter to cover potential losses from bad loans to the struggling oil industry.

Overall, provisions for bad loans at Comerica Inc, Regions Financial Corp, KeyCorp, SunTrust Banks Inc and Fifth Third Bancorp more than doubled to $570 million in the period from $222 million a year earlier.

"The low oil price environment continues to pressure our energy clients, which contributed to the increase in non-performing loans, our reserves and provision expense," William Rogers, chief executive of Atlanta-based SunTrust said on a post-earnings call on Friday.

"We remain focused on being proactive around energy, and therefore have increased the resources and intensity around mitigating our risk and helping our clients navigate through this downturn," Rogers added.

About 2.2 percent of SunTrust's total loans were linked to the energy sector as of Dec. 31, according to Barclays.

Dallas-based Comerica said this week its energy loans accounted for about 6 percent of its total loans. The bank was identified by Barclays as having the biggest exposure to energy of any U.S. bank as a percentage of total loans at year-end.

"Should prices remain in the $30 to $45 range, we continue to expect losses in the $50 million to $75 million range in 2016," David Turner, the chief financial officer at Regions, said on a call with analysts last week.

Birmingham, Alabama-based Regions had energy-linked exposure of 3.9 percent of total loans at the end of the 2015, according to Barclays.   Continued...

 
A branch location of Fifth Third Bank is shown in Boca Raton, Florida, January 21, 2010. REUTERS/Joe Skipper