Charting Banking XI: more on the Texas Ratio

by PlanMaestro

With our new tool it is timeto review the solvency of US banks. As usual, we appreciate the data provided by

The first thing to notice is that the US banking system hit the second derivative somewhere around a year ago and the ratio has been stabilizing around 33%.

Is that good ? Without any historic precedent is difficult to be completely sure, but that number is close to what Virginian banks have and the situation there seems under control. One thing to notice though is that the US banking system is quite concentrated in the big four (Wells Fargo, Bank of America, JP Morgan and Citigroup) so troubles in any one of them can still have systemic implications. We are going to check their ratios later on.

The other good news is that 30 to 90 day delinquencies peaked more than a year ago. It has to be recognized that their level is still quite high (almost 2% of total loans), but the downward trend is important because it signals a slowdown of problem loans inflows and confirms a stabilization of the Texas ratio

So it seems like things are quite OK on the aggregate level. We will drill down by bank size to review the breadth of this improvement and detect potential soft spots.

No position in BAC, WFC, C, JPM