- Is This The Start: Regional Bank Tumbles After Admitting To Previously Under Reserved Energy Loss
by Tyler Durden, www.zerohedge.com
While the energy carnage over the past year has impaired commodities, mostly oil, and increasingly the equity and bond prices of US energy companies, so far one industry has been left relatively unscathed: banks. The reason for this was that over the past year banks have, in filings, earnings calls and investor meetings, taken every possible opportunity to assure investors they all overly provisioned for any potential losses stemming from their exposure to impaired energy loans (despite not one but two consecutive quarters of Jefferies earnings fiascos).
All of this changed today when BOK financial, a $31 billion regional financial services company based in Tulsa, Oklahoma with a $3.4 billion market cap lender covering the West South Central States region of the United States, announced that not only was it overly optimistic with its “previously forecasted a provision for credit losses of $3.5 million to $8.5 million”, and as a result of a major loan impairment on just one energy producer it would have to take a dramatic $22.5 million in credit losses, but that things are slowly going from great to not so great when it also admitted that “we continued to see credit grade migration and increased impairment in our energy portfolio. The combination of factors necessitated a higher level of provision expense.”
BOK Financial is the first bank to admit its rose-colored glasses no longer fit: we expect many more banks with billions in energy exposure to admit they too have been overly optimistic and to send their credit loss reserves soaring even as they have no choice but to admit major charge offs on existing loan portfolios.
But it’s just a $22.5 million loss, what’s the big deal? That may be a good question for the shareholder, who have taken the axe to BOKF stock, which just today has wiped out $300 million in market cap.