The Fed may really be running out of steam, because the Bank of America thunder is starting to blow again.
Do you still have an impression of last year's U.S. banking crisis? At that time, the Federal Reserve raised interest rates aggressively, and several banks must have gone bankrupt at a loss. At that time, Lao Mei reacted quickly and took over immediately, so although the crisis was loud, it was quickly suppressed. But can it really be suppressed? That's impossible, as long as the rate hike starts to increase to this extent, and the banks don't lose money, don't lose significantly, then it doesn't make sense. These days, a community bank called New York in the United States announced its latest results, and the loss in the fourth quarter of last year was as high as 2$600 million, the bank's share price rose by $37 as soon as the news came out7%, which also brought down the stock prices of several other banks. Why such high losses?
Fundamentally, in addition to raising interest rates, this set of logic is the malaise of the U.S. commercial real estate market. Due to the previous mask problem, the vacancy rate of commercial real estate in the United States is climbing rapidly. The value of the property is correspondingly fast**. A professional investor has warned that the office market could lose more than a trillion dollars, and the Federal Reserve has been raising interest rates aggressively in the past two years. This leads to the problem that the assets in the hands of the owners who own commercial properties are already shrinking, and then the interest rates on loans are very high. As a result, many people's capital chains are broken, resulting in serious defaults on bank loans. The bank has a loan loss provision, which basically means that the higher the risk of loan default in the bank's hands, the higher the provision.
In the third quarter of last year, the loan loss provision for New York Community Bank was $62 million, and in the fourth quarter it became $55.2 billion, which is shocking. This is another important reason for his share price**. And in this case, there must be more than one bank. JPMorgan Chase & Co. released a report in April last year that found commercial real estate loans accounting for 28 percent of bank assets7%。By the end of 2025, the U.S. banking sector will face up to $560 billion in commercial real estate debt maturities. In other words, the potential risks of U.S. commercial real estate are far greater than market expectations. This is a big thunder that has not yet exploded. This New York community bank, because during the banking crisis last year, took over the bankrupt Signature Bank, the pressure must have gone up, so this thunder came out first, and it is difficult to say how many banks are lined up behind.
The latest Federal Reserve interest rate meeting has just ended, and it has not been lowered. And Powell also said that it is unlikely to cut interest rates until March. How long is the Fed ready to carry it? We don't know, but it's really hard to say how long the U.S. banking industry can carry in this situation.