U.S. Banks Reduce Second Quarter Energy Exposure Amid Oil Price Volatility
Amid a tumultuous quarter for the energy sector, including a collapse in oil prices in April that briefly pushed futures into negative territory, most U.S. banks have reported related quarterly declines in their prices. energy lending concentration measures.
Of the 11 banks that reported energy exposures as of July 20, Zions Bancorp NA was one of only two banks to report a quarter-over-quarter increase in energy lending as a percentage of total gross lending . First Horizon National Corp. was the other bank to post a modest increase in its exposure to energy.
Following the announcement by Hancock Whitney Corp. On July 17 that it would sell $ 497 million of its energy loans, analysts asked energy-exposed banks if they would take similar moves. Zions executives said Hancock Whitney’s energy loans were more regionalized, and the credit rating included in the sale suggested a different type of product than Zions’ portfolio.
“It’s just a very different set of circumstances in our portfolio,” President and COO Scott McLean said, according to a transcript. “So the short answer is that there really aren’t that many similarities, and we don’t plan to sell part of our portfolio to reduce risk.”
During the week ended July 17, Citigroup Inc. reported the highest nominal amount of outstanding energy and associated exposure with $ 22.2 billion in outstanding loans, or 3.2% of its gross loans.
“When I think of the sectors that drove a lot of the reserve building that we’ve seen, I think of aviation, I think of energy, I think of automobiles, of commercial real estate in a to some extent, and to retail and retail, and that combination has probably generated a third of the build we’ve seen, ”CFO Mark Mason said during the company’s second quarter earnings call.
PNC Financial Services Group Inc. reported $ 4.1 billion in outstanding oil and gas loans, down about $ 500 million from the related quarter. NPLs in this portfolio continue to increase, with around 4% of the portfolio’s current outstanding loans considered nonperforming, CFO Robert Reilly said during the company’s second quarter earnings call.
“We believe we are properly booked for this portfolio, and we will continue to monitor market conditions,” he said.
Regions Financial Corp. reported an allowance for credit losses of $ 882 million for the quarter. “The provision reflects adverse conditions and significant uncertainty in the economic outlook, combined with downgrades in certain portfolios, particularly energy, foodservice, retail and hotel, as well as the impact of $ 182 million. in net expense dollars, ”President and CEO John Turner Jr. said during the company’s second quarter earnings call.
About 10.5% of the company’s reserves are allocated to “high-risk” energy loans in the petroleum services and exploration and production sectors as a percentage of total petroleum services and E&P loans, according to its presentation to investors.