U.S. banks not worried about Greece - yet

By Chavon Sutton, staff reporter

NEW YORK (CNNMoney.com) -- The debt crisis in Greece is unlikely to have an immediate impact on U.S. banks, analysts said Thursday, but contagion to the rest of Europe could prove problematic.

U.S. banks have about $176 billion of exposure to the troubled so-called PIIGS countries - Portugal, Ireland, Italy, Greece and Spain - according to a recent report from Barclays Capital, citing data from the Federal Financial Institutions Examinations Council.

That amount, the majority of which is held by 10 top U.S. banks, represents 5% of the industry's total international exposure, according to analysts Jonathan Glionna and Miguel Crivelli, the authors of the report.

Some analysts say that this is a relatively low exposure, and that should give investors confidence that U.S. banks are safe.

"Generally speaking, any direct exposure [to those nations] is very manageable and modest at best in the total scheme of the large diversified U.S. banks," said Joe Scott, a bank analyst at Fitch Ratings.

But investors are still nervous. In recent weeks, they've increased purchases of credit default protection, a type of insurance against financial loss, in U.S. banks. Analysts said investors aren't completely sure how much exposure to European issues the banks have as the crisis unfolds.

"Banks are fundamentally opaque institutions. You can look at their balance sheets, but you don't know what loans they hold," said James Angel, associate professor of finance at Georgetown University in Washington.

The "follow-on" effects of the Greek crisis, he said, could include shocks to banks' profitability and credit quality. The most material impact could come in the form of a severe deterioration in business loan quality, as companies with European exposure see a slowdown in activity that results in an inability to repay debts.

"The problem with contagion is that you don't know where it ends," said Anton Schutz, president of Mendon Capital Advisors. "An outbreak is an outbreak, and there's no telling if it'll affect one, two, or everybody."

Still, any problem in U.S. banks is unlikely to surface for some time, because it is difficult to obtain information on cross-border risk from individual banks. That information is rarely, if ever, mentioned in Securities and Exchange Commission reports, said Glionna and Crivelli.

This could underline how little risk there is, since the SEC requires banks to disclose foreign loan exposure that exceeds 0.75% of assets or 15% of capital.

But large hedge funds, which have a higher appetite for risk, could be more exposed to Greek and other European securities, said Angel. He said that any banks with ties to those hedge funds could face problems.

"Someone's overexposed, but we don't know who yet. That's where the fear is coming from," said Angel. "We won't find out who's swimming naked until a big default occurs." To top of page

Just the hot list include
Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
by Bankrate.com
View rates in your area
Find personalized rates:
Index Last Change % Change
Dow 21,052.53 -360.91 -1.69%
Nasdaq 7,373.08 -114.23 -1.53%
S&P 500 2,488.65 -38.25 -1.51%
Treasuries .59 -0.04 -6.38%
Data as of 7:47am ET
Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET


Bankrupt toy retailer tells bankruptcy court it is looking at possibly reviving the Toys 'R' Us and Babies 'R' Us brands. More

Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.