Small and Medium-Sized U.S. Banks Have Large Share of CRE Loans In their Portfolio

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The total number of banks in the U.S. declined further last year. At the end of 2008, about 7100 banks were in operation compared to 7300 in  2007 as per the Federal Reserve Bulletin, June 2009.

US-Banks-Total

From over 12,000 in 1990 the number of banks has fallen to 7100 last year.The share of assets held by the largest 10 banks grew by 1% and the assets of the top 100 banks grew by 1.5%. These two category of banks account for 54% and 82% of all total assets at the end of 2008.

Commercial Real  Estate mortgages have started to go bad following the path of residential mortgages. However CRE mortgages form a major portion of the small-to-medium sized banks as opposed to large banks.

US-banks-CRE-Loans

Source: Profits and Balance Sheet Developments at U.S. Commercial Banks in 2008, Federal Reserve Bulletin, June 2009

As the chart shows the share of CRE loans relative to all total loans is very high for small to medium-sized banks. When more CRE borrowers default in the coming months those small and medium banks that have high exposure to this type of loan will have more losses. The Federal Reserve defines the size of the bank as the total assets held at the start of each quarter. This past Friday the FDIC shutdown four banks. Banks that are located in the bubble states of CA,FL, NV and AZ with high CRE loans on their books may be adversely affected.

A Review of the S&P High Yield Dividend Aristocrats

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The S&P High Yield Dividend Aristocrats is part of the  S&P Dividend Aristocrats index series. This constituents in this index have followed a policy of raising dividends each year for at least 25 consecutive years.

In addition, all the constituents are members of the S&P Composite 1500 . The stocks are equally weighted and are re-weighted quarterly.

The constituents of the S&P High Yield Dividend Aristocrats are:

[TABLE=166]

Consumer staple stocks such as KMB, JNJ, MCD, etc. are excellent dividend payers and long-term value stocks. Financials will still experience wild rides due to worsening economic conditions. There may be a few surprises in future quarterly earnings reports as some banks may announce additional new losses.Many banks have also reduced their dividend payouts significantly over last year.

A Look at Top Five China ADRs by Market Cap

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The economy of China is stable and growing due to the government stimulus program focused towards infrastructure per World Bank’s Quarterly Update. Imports of raw materials have increased though exports have not due to lack of demand from overseas. China has tremendous potential to grow the domestic market.

About 42 Chinese ADRs trade in the New York Stock Exchange(NYSE) and many more in the NASDAQ and OTC markets. In this post, lets take a look at the largest five companies by market capitalization that are traded in the NYSE.

1.PetroChina Company Ltd (PTR) is one of the largest integrated oil and natural gas producer and distributor in China. Last year the company had total revenus of $145B. The profit margin is about 11% and the average annual earnings growth is 8%. The current dividnd yield is 3.95%. As the demand for gas continued to rise in China in recent, PTR did performed well with revenues rising 28% annually.

2.China-based life insurer China Life Insurance Co Ltd (LFC) offers “a range of insurance products, including individual life insurance, group life insurance, accident insurance and health insurance products”. At the end of last year China life had “102 million individual and group life insurance policies, annuity contracts and long-term health insurance policies”. LFC pays a dividend of just 0.91%.

3.China Petroleum & Chemical Corp aka Sinopec (SNP) is another integrated oil company with operations in the Chemicals sector as well. SNP operates 16 oil and gas producing fields. Sinopec pays no regular dividends. Similar to Petro-China, SNP’s total revenues rose 26% annually over the past 5 years.

4.Telecom services provider China Telecom Corp Ltd(CHA) has a market cap of $7B. CHA’s current yield is 2.19%. Last year’s total revenue was $27B. Revenue growth was flat at 4% in recent years. Additional new services and offerings such as Blackberry and other mobile technologies should help the company achieve higher growth in future.

5.Aluminium producer Aluminum Corp of China Ltd (ACH) is “principally engaged in the extraction of aluminum oxide, electrolyzation of virgin aluminum and the processing and production of aluminum.” ACH does not pay dividends. Profit margin is a solid 20% and last year’s revenue was $9B.ACH seems inexpensive compared to its peers since the P/E is just 6.62.

The Top 25 World Banks by Assets for 2009

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The total assets the top banks of the world grew by 6.8% in 2008 per The Banker magazine. However there was no asset growth among the top 10 banks in the list shown below.

The Top 25 World banks for 2009 based on Asset Growth are:

[TABLE=164]

Source: The Banker

Royal Bank of Scotland (RBS) tops the list with total assets of $3.5 T.  This amount has grown so high for RBS because it acquired ABN Amro Bank of The Netherlands in 2007 . That deal was the largest banking merger in history. ABN Amro was acquired by a consortium consisting of RBS, Fortis and Banco Santander. This deal is now not only the largest banking merger, but probably one of the worst deals ever since ABN was acquired at the peak of the credit bubble.

Out of the three Chinese banks in this list Agricultural Bank of China and  Bank of China are new entrants this year.Chinese banks are growing rapidly due to strong lending environment in the domestic market as well as growth in select markets overseas. In one of the strategic moves, ICBC of China acquired a 20 percent stake in South Africa’s  Standard Bank in late 2007  for expansion into Africa. Standard Bank is one of the regional heavyweights in Africa with significant presence in many countries.

Another new entrant to the top 25 list is US-based Wells Fargo (WFC). Wells Fargo’s acquisition of Wachovia last year increased its total assets. Llyods Bank (LYG) acquired UK’s largest mortgage lender HBOS plc last year as well.

Weekend Wisdom: U.S. About To Go Broke? Edition

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The United States Federal Reserve is creating too much money, putting the US on the same path as Zimbabwe which, I guess you heard, has finally created so much money that its currency is now officially worthless. Worthless! From the US to Zimbabwe

Migrant workers are hit hard by the Spanish recession Spain drain

Now that the markets have lost a bit of their froth, it seems fitting to note just how sharply trade — and private financial flows — have contracted over the past year. The US q1 balance of payments data is rather stunning.Yes Virginia, there was an international financial crisis in 2007 and 2008

Canada’s largest courier company has taken a lead in trying to reduce its.8 of Canada’s greenest companies

Surging American Savings Rate Reduces Dependence on China as Growth Slows Saks Fifth Avenue is cutting orders 20 percent after posting losses in the last four quarters. Kia Harris says some customers at the Washington shoe store where she works are buying one pair rather than three.

The U.S. is about to go broke and they’ll take us down with them. Can they pay it back?

There are plenty of signs that the Canadian housing market is still on some very shaky ground.Don’t believe the housing hype

Qiao Jian, a secretary at a university in downtown Beijing where her husband is also on the support staff, has to rise before 6 a.m. if she wants to get to work on time. Her daily commute adds up to at least three hours.Beijing home buyers weigh affordability, commute as capital sprawls