Big Mid-Atlantic banks face more losses from the real estate slump, according to a report on Monday from a regional Federal Reserve that suggests the worst has not passed for the beleaguered banking sector.
Prospects of an ever-growing stockpile of bad loans on homes, office buildings and shopping malls will likely force banks to seek additional capital and/or to put aside more money to cover further losses, the Philadelphia Federal Reserve said.
While the latest study focused on banks the regional Fed oversees in three Mid-Atlantic states — Pennsylvania, New Jersey and Delaware, many of them do business across the country.
Financial conditions at these large Mid-Atlantic banks worsened across the board in the last quarter of 2007, deteriorating to their weakest levels in 15 years by some measures, the Philadelphia Fed said.
“Large banks may need to increase their provisioning for loan losses in future quarters, reducing income,” it said in its quarterly “Banking Brief.”
From the Philadelphia Fed: