Bank 2009 Outlook

--wholesale funding model is at a disadvantage --prime mortgage a.JPM expects over 2% charge off in 2009, historic high. --credit cards a.spread to loss ratio worse b.consumer protection law is headwind. The law prevents several aggressive billing practices, such as double cycle billing, or changing the interest rate on the card. The new rules slated to take effect in 2010 c.BOA expects > 7% charge-off, C expects loss exceed historic record, 7.8% --Comm Real Estate CRE a.the worst segment is construction loan because construction financing relies on the sales/lease-up of the completed project to repay the financing. b.office /retail sectors will be weaker. Natonal vacancy rate rose to 13.5%%, still lower than 17% in Q4 03. Zions has most exposure, followed by Wells Fargo, Huntington, and Keycorp c.retail vacancy rate rose to 8.4%; the national shopping center vacancy rate is the highest level since 1994 d.multifamily best positioned of the major REIT sub-sectors, as the home ownership remain constrained because of the falling home prices and strict lending stanards. e.commercial & lending (C&L) hold up relatively well. This is in contrast to the recession in 2001, when corporate credits were the trouble spots for banks. This time consumer lending led the weakness. But slumping economy will take a tool of the C&L. the riskest sectors include automabile and components, followed by transportation, durables and apparel, semiconductor/tech, consumer service, media, and retailing. --the industry has raised dividends, pursued aggressive shares buyback in conjunction with an increasing reliance on hybrids. This has changed in 2008. BAC, WFC, JPM, US Bankcorp, and MS could possibly reduce their dividends further. --Allowance for Loan Lease Loss/Nonaccrual Assets as of Q3 08 is 122.15, much lower than 193.95 in 07, 330.96 in 06, 349.72 in 05. It means bank have not reserved enough cushion against losses.