S&P: Credit losses will rise into 2010
Tuesday, January 13th, 2009Author : contributing writer
Credit ratings agency Standard & Poor’s expects nonperforming loans to continue to rise through 2009 and into 2010, forcing banks to increase reserves to cover losses.
The number of bank failures is also expected to increase amid the widening economic downturn, Standard & Poor’s said in a new report released Jan. 6.
“Asset-quality weakness will likely spread to a wider range of loan types such as commercial real estate, credit cards, and certain pockets of commercial lending, such as loans to the auto and retailing industries,” S&P said according to The Associated Press via BusinessWeek.com.
Such news came as no surprise as analysts widely predicted the recession would cause losses to continue to mount and move beyond residential real estate.
The key will be to use government support to keep capital levels as high as possible, S&P said, though warning that such support cannot completely protect the industry.
The most notable government program at work is the $700 billion TARP program, which stands for Troubled Assets Relief Program. The investment program allows the Treasury Department to directly purchase preferred stock in banks. Other programs include expanding government lending options to various banks, the AP said.
This article was submitted by Kathleen O’Connor, a contributing writer for Biz2Credit. Biz2Credit is a small business marketplace that provides entrepreneurs with the latest industry news and financial advice. Send all questions to info@biz2credit.com.
Tags: commercial loan news, loans defaults 2009, loans to retail business, Tarp small business
