As of 12/31/07, STI had
$122 billion in total loans
$14.912 billion in home equity loans and credit out
$12.312 billion in credit card loans
$13.777 billion were commercial construction loans
$7.494 billion were auto loans through dealers
$3.964 billion were auto loans direct to consumers
$3.6 billion in home direct to perm construction loans
$2.9 billion in land development and acquisition loans
$1.7 billion in Alt A loans, $500 million in 2nd lien
Well over $15 billion in residential mortgage and other asset based securities.
against $18.1 billion in shareholder's equity and $1.3 billion in total reserve for losses.
What do you think these numbers will look like in the quarter ending 3/31?
STI makes BSC look like Fort Knox.
In my opinion..you have totally lost your mind. 24% drop yesterday. It would appear that not many of the institutional investors or anyone else for that matter would agree with you.You are either a genius or a fool. Time will tell.
"You missed, "for performing loans.""
I've got news for you, the reserve for loan losses is not just set aside for nonperforming loans, it's ALL loans. The process for "setting up", if you will, the reserve for loan losses is a very detailed one. One component of the reserve looks at the dollar amount of loans in the various credit categories and applies a percent to the principal outstanding (principal AFTER any charge-offs that might have already occurred) to determine the reserve for the aggregate loans in that speciic credit category. All the credit categories are then summed and that is what's called the specific reserve. Loans in the absolute worst category may be reserved at 100% or something close to that. Loans in a "better" category may be reserved at 20%. I don't know the specific categories at SunTrust nor the actual percentages applied. However, I do know this is the methodology applied. One important note: Not all the loans that are covered in the specific reserve are nonperforming. They may very well be current on all their payments but their credit rating was changed because of their financial health or industry problems.
The second component of the reserve is the general reserve and that is meant to apply to the loan portfolio overall. It is based on statistical analysis of the overall portfolio of loans and considers historical loss patterns and current economic factors. This is not based on whether any specific loan is performing or nonperforming.
The total of these two components is the reserve for loan losses and, as you can see, it's not just for nonperforming loans. It's ALL loans.
"but hey, I've made a mistake once or twice too"
How about just in this one thread, LMAO.
Full Principle(sp) Recognition? Didja ever hear of the reserve for loan losses? That balance is supposed to represent the difference between full principal and what you expect to collect.
Not liquidation value, but a valuation discounted for a reasonable sell-out period. And, I'm not talking about a five-year sales program.
You can value capital equipment various ways: liquidation value, value in place and going concern value.
I'm not suggesting liquidation value, I'm suggesting something similar to "value in place." In other words, a REALISTIC VIEW, versus "GOING CONCERN VALUE" when the concern isn't going to go much longer -- if you know what I mean.
Most institutions are pretending that they expect the market to come back within a couple years and bail them out of their bad loans. I just don't believe that will happen, and if conditions continue to deteriorate (generally, with a slight let-up in 2009, followed by a severe worsening in 2010) the balance sheets of practically EVERY financial institution are grossly inflated.
So, in summary, it depends on your perspective. If you think everything will be fine, and aren't "worried" like our Fed Chairman, then you probably think that the current "full principle recognition" asset accounting method is just fine for performing loans.
IMO, you're fooling yourself, but hey, I've made a mistake once or twice too.
If the loan was deep under water it wouldn't matter (unless the low FICO borrower was a cretin, then it would be more likely that the high FICO score is the greater risk, lol).
I suspect the high FICO would be worth something.
That said, Chase chose to freeze all HELOCs at 60% in severely hit states, regardless of FICO (80% elsewhere).
That should tell you something.
That comment I didn't expect. Help me understand by you meant by that. Do you really believe a bank, or any public company for that matter, should be forced to write down their assets to current liquidation value? Should Wal-Mart be forced to write down their inventory of, let's say, foam pool noodles, to what they could realize if they attempted to sell them in the secondary market? But wait - there is no active secondary market for foam pool noodles right, so is the value of all of Wal-Mart’s pool noodles in inventory zero? By that logic, it would seem Wal-Mart is probably insolvent and should file for bankruptcy, no?
I do not agree with you on this point. The problem is not with the realizable values banks are holding their loans on the balance sheet at. The problem is the secondary market for those assets has vanished - there is no appropriate secondary market valuation mechanism for many of these assets today, so what's a bank to do - write everything down to zero? Do you really argue that zero is the present value of the future cashflows a bank will receive by holding those assets? Which is the more appropriate valuation method for a shareholder? Conversely the guaranteed portion of bank SBA 7a loans regularly sells for more than par in the secondary market – should banks be able to write those assets up on their balance sheets?
Many banks don't care to securitize and sell assets anyway, they don't have to and traditionally banks have made most of their money on net interest margin, not on securitizing and selling assets.
If FICO scores don't matter, let me ask you this. If two people each had a home equity lines with a 100k balance and both had good jobs and equal DTI ratios, but one had a FICO score of 550 and one had a score of 750, you wouldn't value the loan made to the person at 750 higher than the one at 550.