Monday, April 20, 2009

Distinguishing the Banks

Against the backdrop of near constant speculation concerning the financial health of the Nation's largest financial institutions, we prepared the above chart, which should be useful insofar as determining the relative deterioration of these Bank's loan portfolios. The chart tracks "Provisions for Loan Losses", which is essentially an expense (deducted from earnings) based upon management's assumptions regarding impending loan loss amounts and subsequent regulatory capital requirements. There are obviously shortcomings involved in using this metric alone as a measure of Bank health: The figures are susceptible to management's discretion and they do not account for the many other ways that a Bank can lose money i.e derivatives, trading etc. There is however, a certain amount of insight that can be gleaned from the chart above. This should not be too difficult for the average reader of this site.
Sphere: Related Content

No comments:

Post a Comment