Silke
12.01.2001, 22:09
Friday January 12, 3:52 pm Eastern Time
Analysts: Loan Defaults May Jump in '01
NEW YORK (Reuters) - Loan defaults by U.S. companies could jump by nearly 50 percent in 2001 from the previous year, according to analysts at Salomon Smith Barney.
Quantifying industry and company exposures to potential loan defaults, the analysts compiled a list of troubled loans totaling $51 billion and estimated that borrowers could default on $33 billion of those loans in 2001 versus $23 billion in 2000.
Salomon Smith Barney concluded that prices of bank stocks already reflect a lot of bad news. Because most of the credit risk is already reflected in most bank earnings estimates, the analysts lowered per share earnings estimates only for Bank One Corp. and Comerica Inc.
For Bank One (NYSEhttp://www.stock-channel.net/Board/smilies/redface.gifNE - news), the Salomon Smith Barney analysts reduced their earnings estimate to $3.00 from $3.07 per share. Similarly, the estimate for Comerica (NYSE:CMA - news) was trimmed to $5.00 from $5.05.
``Assuming a soft landing, we believe investors will anticipate the peaking of nonperforming loans and will focus on Fed easing,'' the analysts said.
The analysts advised keeping a watchful eye on asbestos-related credits, such as loans to Owens-Illinois (NYSEhttp://www.stock-channel.net/Board/smilies/redface.gifI - news; $4.5 billion in loans), Crown Cork & Seal Co. (NYSE:CCK - news; $2.5 billion) and Federal-Mogul Corp. (NYSE:FMO - news; $1.75 billion).
But the analysts said that based on potential liability, reserves, and balance sheet strength, Owens-Illinois and Crown Cork seem to have among the least risk of default among asbestos-related borrowers. Federal-Mogul's recent syndication of a new $350 million loan ``with attractive terms for investors'' was cited as a positive sign for that company's credit.
The risk of default in utility credits remains, but has been reduced as companies work through their liquidity issues, the analysts said.
Analysts: Loan Defaults May Jump in '01
NEW YORK (Reuters) - Loan defaults by U.S. companies could jump by nearly 50 percent in 2001 from the previous year, according to analysts at Salomon Smith Barney.
Quantifying industry and company exposures to potential loan defaults, the analysts compiled a list of troubled loans totaling $51 billion and estimated that borrowers could default on $33 billion of those loans in 2001 versus $23 billion in 2000.
Salomon Smith Barney concluded that prices of bank stocks already reflect a lot of bad news. Because most of the credit risk is already reflected in most bank earnings estimates, the analysts lowered per share earnings estimates only for Bank One Corp. and Comerica Inc.
For Bank One (NYSEhttp://www.stock-channel.net/Board/smilies/redface.gifNE - news), the Salomon Smith Barney analysts reduced their earnings estimate to $3.00 from $3.07 per share. Similarly, the estimate for Comerica (NYSE:CMA - news) was trimmed to $5.00 from $5.05.
``Assuming a soft landing, we believe investors will anticipate the peaking of nonperforming loans and will focus on Fed easing,'' the analysts said.
The analysts advised keeping a watchful eye on asbestos-related credits, such as loans to Owens-Illinois (NYSEhttp://www.stock-channel.net/Board/smilies/redface.gifI - news; $4.5 billion in loans), Crown Cork & Seal Co. (NYSE:CCK - news; $2.5 billion) and Federal-Mogul Corp. (NYSE:FMO - news; $1.75 billion).
But the analysts said that based on potential liability, reserves, and balance sheet strength, Owens-Illinois and Crown Cork seem to have among the least risk of default among asbestos-related borrowers. Federal-Mogul's recent syndication of a new $350 million loan ``with attractive terms for investors'' was cited as a positive sign for that company's credit.
The risk of default in utility credits remains, but has been reduced as companies work through their liquidity issues, the analysts said.