M&I says its bad debts are easing
Milwaukee-based Marshall & Ilsley Corp. has announced several improving credit quality trends for the third quarter of 2009.
The parent company of M&I Bank said its nonperforming loans as of Sept. 30 are expected to decrease by approximately $170 million from June 30. This is the company’s first linked-quarter decline in nonperforming loans in four years.
M&I expects its ratio of nonperforming loans to total loans will decline to approximately 4.9 percent as of Sept. 30. In addition, the company’s early stage loan delinquencies (those loans delinquent 30 to 89 days) decreased by approximately $220 million, or 20 percent, from June 30 to Sept. 30.
"While we see some continuation of improvement in credit quality, and read these as hopeful signs of what’s ahead, we will continue to manage the business as though the recessionary effects in the economy will remain for several more months," said Mark Furlong, president and chief executive officer of M&I. "There simply are an inadequate number of consistent trends to reinforce the sentiments that the economy is stabilizing and better times are within sight."
M&I expects to record a special provision for loan and lease losses for the third quarter of approximately $185 million for certain bank holding company loans (collectively, "bank holding company loans"). This $185 million special provision is in addition to the approximately $390 to $400 million provision for loan and lease losses previously anticipated for the third quarter of 2009.
With the additions, M&I expects the total provision for loan and lease losses for the third quarter of 2009 will be in the range of approximately $575 to $585 million and expects net charge-offs in the range of approximately $530 to $540 million. Estimated charge-offs for the quarter included approximately $160 million related to the bank holding company loans. M&I expects that the allowance for loan and lease losses as a percentage of total loans and leases will increase from 2.8 percent at June 30 to slightly over 3 percent at Sept. 30.
The special provision for the bank holding company loans is due to a series of recent events, including: 1) regulatory actions against certain of these bank holding companies; 2) unanticipated difficulties and/or delays in capital raising transactions by certain of these bank holding companies; and 3) significant deterioration in the loan portfolios of certain of these bank holding companies.
As a result of these actions, M&I expects to report a third quarter net loss in the range of 68 to 70 cents per common share. M&I will report its third quarter financial results on Oct. 22.