The $147 billion question for banks: Will energy companies max out their credit lines? When big banks announce earnings starting Wednesday, the spotlight will be on vast energy loans that most investors didn’t know much about until recently. These unfunded loans have been promised to energy companies, which haven’t yet tapped the money. Many...
On the eve of the earnings season for US banks, press reports focus on their massive energy loans. Historically banks haven’t disclosed loans to the energy sector, but have begun to do so as the price of oil and gas has remained at lower levels for an extended period. The Energy Information Administration (EIA) reported that in January 2014, total U.S. crude oil production was down by about 1 million barrels per day from a year earlier. Fitch is expected to release a report later this week, stating that nearly 60% of sub-investment-grade energy loans are likely to have loans in danger of default under regulatory guidelines. The bank often use a company’s proven energy reserves as collateral for loans and with the oil price at $40 it becomes a source of concern according to a Barclays analyst.