According to RBC Capital Markets, more than 1,000 US banks may fail over the next 3 – 5 years as commercial loan losses pile up. This would be on the same level as the great savings & loan collapse back in 1988 – 1990 when 1,386 lending institutions failed.
To put that into perspective, according to the US Federal Deposit Insurance Corp, FDIC, there are 8.309 lending institutions in the USA and only 25 failed in 2008. Yet 9 have already failed in one month so far in 2009.
The Royal Bank’s recently published Q109 financials also bear witness to the sorry state of US banking. The Royal’s Provision for Credit Losses (PCL) in US banking soared from $10M in Q107 to $71M in Q108 to $200M in Q109 = 75% of the total PCL for the Royal Bank.
The Royal’s US Gross Impaired Loans (GIL), illustrated above, - which are loans that are highly likely to become credit losses – also soared from $0.1B in Q107 to $0.6B in Q108 to a staggering $2.2B in Q109 = 63% of the total GIL.