Bankers see more losses ahead

Credit cards, commercial real estate are just two trouble spots in 2009, Fed survey of loan officers reveals.

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By David Ellis, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Bankers are bracing for additional losses this year across a wide variety of loan categories, according to a report published Monday by the Federal Reserve, as the nation continues to suffer under the weight of a painful recession.

In the central bank's latest survey of loan officers, more than 90% of domestic lenders warned of further deterioration across such loan portfolios as credit cards, commercial real estate and non-traditional mortgages.

The threat of rising loan losses, which remains the biggest headwind for the nation's banking industry going forward, comes as industry regulators are poised to report the results of "stress tests" of the nation's 19 largest financial institutions later this week.

Some large financial institutions -- including Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) and Wells Fargo (WFC, Fortune 500) -- are believed to require additional capital as a result of regulators' findings, according to recent reports.

Hoping to minimize their exposure to future losses, senior loan officers at many financial institutions acknowledged that credit continued to remain tight during the first quarter.

Nearly 60% of those surveyed said they tightened their lending standards on credit cards, which was unchanged from when the Fed last delivered its reading on bank lending in February.

Lending standards on prime mortgages also remained elevated, even as demand for prime mortgages surged, according to the Fed.

Banks also moved to rein in existing lines of credit to both U.S. businesses and households during the latest quarter.

About 65% of loan officers surveyed said they had lowered credit limits to either new or existing credit card customers over the last three months.

Banks' willingness to lend money has become a focal point in the ongoing crisis as the U.S. government has provided a massive amount of aid to financial firms in an effort to get credit flowing again.

Despite criticisms from both lawmakers and taxpayers, industry executives maintain they are still making new loans and extending existing credit lines to both consumers and businesses.

Banks have also cited weakened demand for a variety of consumer and business loans, which was once again evident in Monday's survey. To top of page

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