trending Market Intelligence /marketintelligence/en/news-insights/trending/t33K-HDzviWao6R6shUwRQ2 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us
In This List

Q1'16 energy exposure at US banks and thrifts

Banking Essentials Newsletter - November Edition

University Essentials | COVID-19 Economic Outlook in Banking: Rates and Long-Term Expectations: Q&A with the Experts

Estimating Credit Losses Under COVID-19 and the Post-Crisis Recovery

StreetTalk – Episode 70: Banks' Liquidity Conundrum Could Fuel M&A Activity

Q1'16 energy exposure at US banks and thrifts

Even with the recent surge in oil and gas prices, investorsremain concerned about energy and energy-related exposure in the bankingindustry. Many companies reported an increase in their outstanding exposure inthe first quarter.

According to ananalysis by S&P Global Market Intelligence, 11 companies that reportedfirst-quarter earnings as of April 20 disclosed energy and energy-related loansof greater than $200 million. The data was collected on an as-reported basisfrom earnings releases, earnings conference call transcripts, 10-K filings,10-Q filings and investor presentations. The list was compiled on abest-efforts basis.

CitigroupInc. disclosed that it held $23.7 billion of outstanding energy andenergy-related loans at March 31, more than any other public bank or thriftbased in the U.S. Citi's funded exposure, 40% of which was non-investmentgrade, increased 7.2% in the first quarter relative to the end of 2015. Itsportfolio included $7.6 billion in exploration and production and $3.6 billionin service and drilling. The bank's total energy exposure (including loancommitments) of $59.3 billion (29% non-investment grade) also topped theindustry, although the amount fell by more than $1 billion in the first quarter.

SNL Image

Next up in terms of outstanding loans is , with a March 31balance of $21.8 billion, representing a 2.6% linked-quarter change. Utilizedexposure in the refining and marketing energy bucket was up to $6.3 billionfrom $5.6 billion, while the oil field services category declined to $2.9billion from $3.4 billion. Energy reserves more than doubled sequentially, andenergy net charge-offs were up $17 million to $102 million.

At March 31, Wells Fargo & Co.'s outstanding oil and gas exposurewas $17.8 billion (around 93% non-investment grade) and its total exposure(including commitments) was $40.7 billion (around 78% non-investment grade).Like Citi, funded loans increased and total exposure declined during the firstquarter. Approximately half of the 2.7% quarter-over-quarter increase inoutstandings came from loans acquired from GE Capital. Nonaccrual energy loanswere up to $1.9 billion, which was around 125% higher than the amount at Dec.31, 2015. Additionally, net charge-offs in the oil and gas space increased $87million to $204 million.

For JPMorganChase & Co., drawn credit exposure in the oil and gas andnatural gas pipelines sectors increased 7.9% during the first quarter to $15.3billion, 70% of which was non-investment grade. The total energy exposure(including commitments and derivatives) was up to $47.9 billion (49%non-investment grade) from $46.3 billion at year-end 2015. The bank built itsenergy reserves by $529 million, pushing the total to $1.3 billion;approximately 72% of the reserves were allocated to the funded credits.

SNL Image

LegacyTexasFinancial Group Inc.'s outstanding energy exposure (includingreserve-based loans, midstream loans and oil field services loans) was $528.7million, essentially unchanged from the prior quarter. LegacyTexas stands out positively in thesector in terms of detailed disclosures about its portfolio. In thefirst-quarter investor presentation, the bank revealed that $276 million of itsoutstanding energy loans was backed by private equity investors. Additionally,the bank reported that a significant percentage of its energy exposure ishedged for the next three years — for 2016, 85% of the engineered proveddeveloping producing volume of the gas portfolio is hedged at a weightedaverage price of $3.36, while 47% of the oil production is hedged at an averageof $70.23.

To view previous articles on energy exposure, click on the following links:

Earnings conference call transcripts, earnings releases and investor presentations can be accessed under the News, Events and Filings section of a company's briefing book page.