Your Bank Questions Answered - Interview Posted

[ExpectedValue]

A lot of you submitted questions to me for this, I tried to get everyone's questions answered:

 

http://streetcapitalist.com/2009/10/14/my-interview-with-the-bank-analyst/

[Guest kawikaho]

Much thanks.

[rranjan]

Interesting read. Thanks for putting this together.

[arbitragr]

oh well ... didn't get my question in there. never mind.

[ExpectedValue]

oh well ... didn't get my question in there. never mind.

 

Oh yeah, sorry about that. He couldn't answer the Citi question specifically because he didn't want to discuss that particular name.

 

About provisions though, was that related to Citi or more broadly with banks? Basically, he re-iterated over and over that bank provisions are going to vary based on factors of geography and loan composition. In general, if a bank did mostly early stage credit loans, then provisions will likely go down as time progresses because those problems are/have been worked through. For banks with a higher concentration of later stage credit problems, provisions may have to go up.

 

I don't know if that helps any.

[Rabbitisrich]

Great job, Tariq. Your interviewee provided some really great responses. Is that really how the guy talks in a normal conversation? I have to sit down and organize my thoughts to write like that.

 

His comments about CRE are especially interesting:

CRE is an interesting animal. 1. There’s a lot of weird accounting 2. The structure of the loan itself. So there are these mini-perm loans for example where on the third or fifth year, the principle balance of the loan is due. A lot of these loans were made between 2005-2007. You still have 2009-2011 where things will come due. But a lot of these mini perm loans get extended out a year. So instead of going to non-performing they just get extended out and to all of us we continue to think they are performing.

 

A lot of the failed banks had 2-4% delinquencies in CRE and then a quarter later delinquencies shot up to 30%!. So you don’t really see that in other categories as the increase is gradual Q/Q.

 

[Zpoly]

Thanks Tariq.

[ExpectedValue]

Great job, Tariq. Your interviewee provided some really great responses. Is that really how the guy talks in a normal conversation? I have to sit down and organize my thoughts to write like that.

 

Yeah he's really bright, that's pretty much how he talks. I just spent couple hrs just writing down word for word what was said on the phone call and then I cleaned up grammatical errors.