Saturday, November 06, 2010

Banks Face $31 Billion Loss on Mortgage Buybacks

According to a Standard & Poor's report the top six banks in the U.S. (Bank of America Corp, JPMorgan Chase & Co, Wells Fargo & Co, Citigroup Inc, US Bancorp, and PNC Financial Services Group) could face up to $31 billion in losses from buying back bad mortgage.

According to, the financial giants are being pressured to buy back loans that were packaged and resold to investors.

The potential mortgage buyback losses would affect the banks' future profits, but are "not likely to affect our view of the banks' capital adequacy," Sharma wrote.

But those losses on mortgage buybacks, combined with the effects of increased regulation and an expected decrease in net interest income, "will likely hamper the financial recovery of the U.S. banks in 2011 despite declining credit costs," Sharma concluded.

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