Losses on home equity and other second mortgages may cost the four biggest U.S. banks $22.6 billion more than budgeted, with Wells Fargo & Co. most at risk, according to Glenn Schorr, an analyst with Nomura Holdings Inc.
The tally for Wells Fargo, the largest U.S. home lender, may reach $8.79 billion after accounting for taxes and existing provisions, followed by Bank of America Corp. at $6.2 billion, JPMorgan Chase & Co. at $5.51 billion and Citigroup Inc. at $2.12 billion, Schorr told clients in a report Friday. Before taxes and reserves, losses could total $73 billion, he wrote.
While the losses may be large, "we don't see this as a ticking time bomb" for banks because of reserves and the damage will be spread over a long period, Schorr wrote. "They will be given time to address any shortfalls."
Regulators are examining whether banks accurately valued home equity and other second-lien mortgages and if they've put enough aside to cover losses, seven people with knowledge of the matter have said.
Measured by gross losses, the tally for Bank of America could exceed $24 billion, while Wells Fargo may lose as much as $20 billion, Schorr estimated. JPMorgan Chase's liability could be $19.5 billion, while Citigroup could see as much as $8.96 billion, he said.
Thomas Kelly, a spokesman for JPMorgan Chase, Natalie Brown at Wells Fargo and Citigroup's Shannon Bell did not comment. Bank of America didn't immediately respond to inquiries.
