Fitch: U.S. Banks Steady Amidst Oil Price Declines
Volatile and plummeting oil prices are weighing heavily on global
confidence; however, direct exposure to oil & gas is fairly modest for
U.S. banks, according to a review by Fitch Ratings. U.S. banks reported
increased energy-related loan provisioning in fourth quarter 2015;
however, the impact to capital for larger banks is expected to be
manageable in Fitch's view.
'The majority of U.S. banks are positioned well to withstand the
volatile energy markets even in the riskiest segments including oilfield
services, exploration and production companies, and losses to date have
been minimal,' said Doriana Gamboa, Senior Director, Fitch. 'Going
forward, the oil impact on banks could intensify as oil hedging
protections roll off, capital markets funding diminishes and expense
management options dwindle.'
If the price of oil remains lower for longer than expected, banks may
struggle with additional provisioning. However, Fitch expects oil prices
to increase to $45 per barrel on average in 2016 and $55 in 2017, which
marks a large improvement from current prices of around $30 a barrel.
Whether oil prices improve, however, remains to be seen.
'Larger U.S. banks should be able to weather loan provisions without
rating pressures, but negative rating actions are possible for some
midtier banks if oil prices remain depressed near or under the $30 per
barrel range for an extended period,' said Julie Solar, Senior Director,
In January, Fitch revised the Outlook for BOK Financial, a midtier
regional bank, to Negative from Stable, due to the bank's larger
relative oil exposure and challenging market conditions in oil-rich
Texas and Oklahoma.
In Fitch's view, regulators are likely to call out oil & gas exposure in
the next Shared National Credit review (SNC) beginning in February. The
upcoming SNC review could drive some ratings changes for U.S. banks with
greater relative oil pressure exposure.
Additional information is available at www.fitchratings.com
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Copyright Business Wire 2016
Source: Business Wire
(February 5, 2016 - 11:42 AM EST)
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