Allianz Global – US Banks Prepare For The Worst.
“Allianz Global” Provisions for future defaults were a key feature in the quarterly banking sector results.
Allianz Global, the Italy-based asset management firm is apparently unsurprised by the large provisions that are being made by the large US banks for future credit defaults and loan delinquencies.
A source close to analysts at the firm said that they were never in any doubt that the rebound in the equity market since the lows of March 2009 was never likely to be mirrored in the real economy where unemployment has continued to rise and home foreclosures show little sign of moderating.
JP Morgan Chase revealed a Q4 2009 profit of $3.3 billion but this was mostly generated by its investment banking and private equity divisions. The bank’s retail divisions, which include its credit card and branch network acquired after the collapse of WaMu (Washington Mutual) last year, reported a loss of over $700 million in the same quarter.
Allianz Global analysts believe that the situation is likely to worsen especially if the US Federal Reserve decides to withdraw the stimulus that is supporting the economy.
The consensus is that neither the housing nor the auto sectors will be able to mount effective and sustainable recoveries without incentives like the so-called “cash-for-clunkers” program or the $8000 tax credit for first-time homebuyers.
Allianz Global is also thought to believe that the US government may be forced to inject more stimulus if the economy shows signs of heading back into recession and that this could result in a dollar crisis.