Citigroup likes bragging about the depth of its capital, promoting that as evidence of its financial strength. But a study by UBS Warburg paints a far bleaker picture, saying that Citi’s reserves are more than 30% lower than they should be. Others in a similar category are Bank of America, Comerica, Charter One Financial and Northern Trust.

UBS Warburg’s latest semi-annual review of the adequacy of bank reserves is not a happy one. It finds that 59% of the 39 banks it follows have implied reserve deficits. Only 11 show adequate reserves according to UBS Warburg’s analysis.

The best, those whose reserves are 20% or more than UBS thinks they should be, are Wells Fargo, Valley National Bancorp. and National Commerce Financial.

The analysis is not based on the traditional approach of looking at loan loss reserves as a percentage of total loans. Instead, it determines whether a bank is over- or under-reserved by examining its loan mix as well as its non-performing loans and credit card charge-offs.

UBS Warburg acknowledges that no outsider can be certain of the adequacy of reserves at any particular bank. Its formula calls for 100% reserves against non-performing assets; 25 basis points against residential mortgage loans and home equity loans; the most recent quarter’s credit card losses annualized, and 1% of all performing loans.

Bank Reserve Adequacy
UBS Warburg’s Semi-Annual Analysis
Most Over-Reserved % Over-Reserved
Valley National, Wayne, NJ 26
National Commerce, Memphis 23
Wells Fargo, San Francisco 21
Most Under-Reserved % Under-Reserved
Charter One, Cleveland —59
Northern Trust, Chicago —41
Citigroup, New York —36


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