Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. may lead 20 publicly traded U.S. banks that charge off as much as $40.9 billion on home equity investments this year, Fitch Ratings said.
In the worst-case scenario considered by Fitch, the three banks may write off a combined $31.2 billion as loans from the height of the housing market sour, analysts John Mackerey and Ken Ritz wrote in a report Wednesday. The 20 banks on the list, which includes only lenders with above-average exposure to the business, could charge off a total of as much as $76.7 billion in the two years through 2011, the rating company estimated.
"Fitch is concerned that large core portions of these portfolios that were originated during the peak of the housing boom are increasingly at risk due to continued weakness in the housing market," the analysts wrote. "These loans are becoming less secured and will increasingly exhibit loss severities more similar to unsecured credit."
Bank of America may lead chargeoffs with as much as $11.8 billion this year and $22 billion through 2011, they wrote. Wells Fargo may follow with $10 billion and $18.7 billion in one- and two-year chargeoffs. JPMorgan Chase may book $9.4 billion this year and $17.7 billion through the end of 2011, Fitch said.
