Fed H8 Data as of Sep 14…has a minuscule increment in Loan Loss Reserves/Loans of 1.4%…System has $160B in Reserves on Sheet mostly Cards.
So don’t expect any meaningful increase in Net Charge Offs that are still at 22bps as of 2Q22 for the US Banking System.
$XLF #Reflation
So don’t expect any meaningful increase in Net Charge Offs that are still at 22bps as of 2Q22 for the US Banking System.
$XLF #Reflation
Credit Costs… Will Normalize…. Banks have said this ever since Forbearance ended.. you just won’t see anything too meaningful in 3Q22…
Banks have Over Earned on Credit & Under Earned on NII coming into 2022.. NII is now Ripping..
Banks have Over Earned on Credit & Under Earned on NII coming into 2022.. NII is now Ripping..
GSIB Card Books also have 6-8% Loan Loss Reserves that Buffer any future Credit Normalization - that’s totally Normal & Appropriate in Year 3/4 of a Recovery… assuming the Fed doesn’t Shank this Recovery into the Drink or OB.
Story of 3Q22 is gonna be this Fed SLR “Induced”… AOCI Unrealized Capital burn down… the Anti Bank Zealots get their way but haven’t thought through RRP bids showing up when we get closer to Terminal Reserves.. tho by then Inflation will have likely Crashed. TBD.
Next episode… good luck trying to get Banks to Accept QE w/o SLR Relief….
Nobody wants any of that HQLA if you are going to artificially jam Fake AOCI Losses down their Throats, Suspend Buybacks, & force them into Selling perfectly good Risk to Customers.
Nobody wants any of that HQLA if you are going to artificially jam Fake AOCI Losses down their Throats, Suspend Buybacks, & force them into Selling perfectly good Risk to Customers.
The Fed doesn’t know it… but by not excluding Cash from SLR… they are Leaking Cash to Shadow Banks… that they have Zero Control over… that’s gonna be fun.
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