Below are articles from our "Is Your Bank Safe?" series examining banks with issues
of which depositors should be aware. Banks that we consider safest for depositors in terms of
our stress test criteria are highlighted in our
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Canadian banks were among the safest in the world during the 2008–2009 crisis, but a lot has changed since then, and we believe the Canadian banking system is very likely to face major issues. One of the most significant problems that we have discussed is that, in contrast to the U.S., Canada has quite a large share of variable-rate mortgages, which are certainly a big headache for borrowers in the current rising rate environment. The latest numbers reported by the Canadian banks suggest that the situation continues to deteriorate.
In our first article, we discussed consumer lending and its significant negative impact on the stability of the banking sector.
This is the second in this series of articles within which we will discuss commercial real estate (CRE) lending.
The current rise in consumer lending will likely place greater pressure on the already weak banking system in the coming years. This is just one of the many issues we have identified, upon which very few are currently focusing.
As part of our ongoing series of articles on bank stability, and at the request of many of our clients at Saferbankingresearch.com, we wanted to address the merger between PacWest (PACW) and Banc of California (BANC).
The Big Six Canadian banks have recently reported Q2 results, and the numbers confirmed various concerns that we have discussed in our previous articles. Canadian banks are very likely to face major credit quality issues due to a combination of significant exposure to variable-rate residential mortgages, a higher-for-longer interest rate environment, and a very elevated level of household debt in Canada. Moreover, there is also pressure on the revenue side.
As part of our ongoing series of articles on bank stability, and at the request of many of our clients at Safer Banking Research, we wanted to address Ally Bank in this missive. I want to take this opportunity to remind you that we have reviewed many larger banks in our public articles. But, I must warn you. The substance of that analysis is not looking too good for the future of the larger banks in the United States.
As part of our ongoing series of articles on bank stability, we wanted to address Canadian banks in this missive. Canada did not have a banking crisis in 2008. In fact, during the Great Recession, Canadian banks, especially the so-called Big Six, were among the safest banks in the world. However, their business models have changed significantly since then. Yet, many retail depositors in both Canada and the U.S. still think that Canadian banks would be a safe haven in a major global crisis. In this article, we would like to highlight some of the issues we currently see at Canadian banks.
As part of our ongoing series of articles on bank stability, we wanted to address PNC Bank (PNC) in this missive. As you can see, PNC has a number of issues which could come to the foreground in the event the market begins to move into a difficult economic environment.
In contrast to PNC, the Top-15 U.S. banks we have found at SaferBankingResearch have low exposure to commercial lending, rely on much cheaper funding, have better operating efficiency, and have much higher capital adequacy ratios. The banks we have identified also have lower shares of longer-duration bonds.
George Santayana once wisely noted that "those who do not remember the past are condemned to repeat it." Throughout market history, market historians had many instances from which lessons in hubris should have been learned. Yet, most do not learn the lessons history has to offer.
Many depositors were shocked by the SVB collapse, which, in our opinion, demonstrates that the majority of them are ignorant of serious systemic risks in the U.S. banking system. In fact, we specifically warned about this issue residing at the major banks in an article just weeks before SVB (SIVB) collapsed.
The FDIC recently released its Quarterly Banking Profile, a publication that summarizes the financial performance of all FDIC-insured institutions. In this article, we would like to highlight the key takeaways from the publication, which, in our view, suggest that most U.S. banks are very likely to face major liquidity issues soon.
The Fed is adjusting its bank stress test, but,
unfortunately, its new testing standards leave serious holes in determining the true strength of a bank. Let's take a look at the red flags within the Fed's new testing standards.
In our view, JPMorgan is one of the best U.S. mega banks. It is a well-run institution and its business and overall fundamentals have significantly improved over the past 10 years. However, even this high-quality franchise has quite a lot of red flags, which, in our view, could lead to major issues for depositors in a bear market.
Over the last few months, we have written several articles outlining our views of banks in general. We explained the relationship that you, as a depositor, have with your bank is in line with a debtor/creditor relationship. This places you in a precarious position should the bank encounter financial or liquidity issues. Moreover, we also outlined why reliance on the FDIC may not be wholly advisable. And, finally, we explained that the next time there is a financial melt-down, your deposits may be turned into equity to assist the bank in reorganizing.
You must understand the relationship you have with your bank in order to protect your assets.What is a "bail-in?"How can a "bail-in" affect your rights as a depositor?In my last article regarding the safety of banks today, I tried to explain the legal relationship you have with your bank:"Although you may feel that you have a credit balance in your bank account, pleaserealize that your credit balance is only as safe as the underlying bank's assets. Since a bank's assets are generally the loans it owns, the underlying loans of your bank are actually your problem. In fact, most people do not realize that the bank is not a simple depository agent for money.