Home prices have fallen by 5.1% in the past year. Total cumulative loan losses to the U.S. banking (NYSE:KBE) sector could increase by $70-80 billion if there were a 15% drop in housing prices between now and December of next year, not including losses to mortgage-backed securities portfolios, which comprise 11% of the total assets of U.S. banks. With residential real estate loans making up 37% of bank loans in 2010, banks are more exposed to the residential housing market (NYSE:IYR) than ever.
Here’s a look at the five banks most vulnerable to a new housing meltdown according to Dan Freed at TheStreet.com:
5. PNC Financial Services (NYSE:PNC) – One to four family mortgage loans make up 19.8% of PNC’s total assets, but they are projecting distressed assets to drop by 25% in 2011.
4. BB&T Corp. (NYSE:BBT) – One to four family mortgage loans make up 22.3% of BB&T’s total assets. BB&T had very disappointing first quarter earnings, with problem asset levels remaining high despite efforts by management. However, BB&T shares are considered favorable because they should be nearing an inflection point.
3. Regions Financial (NYSE:RF) – One to four family mortgage loans make up 22.5% of RF’s total assets. Regions has nearly $30 million in mortgage loans, 2.3% of which are in foreclosure and 1.6% are 30-89 days past due.
2. SunTrust Banks (NYSE:STI) – One to four family mortgage loans make up 27.1% of SunTrust’s total assets, with 5.7% of those loans currently in foreclosure and 1.7% between 30 and 89 days past due.
1. Wells Fargo (NYSE:WFC) – One to four family mortgage loans make up 28.2% of Wells Fargo’s total assets. Wells Fargo also had disappointing first quarter earnings. The smallest of four giant banks, Wells Fargo has significantly smaller investment operations than Citigroup (NYSE:C), JPMorgan Chase (NYSE:JPM), and Bank of America (NYSE:BAC). With 9,000 stores in 50 states and 70 million customers, Wells Fargo serves one in three households in the U.S.