We have begun to see default cracks in Commercial banks like $COF, $ALLY, $OZK and others. According to our sources, a sizeable default is expected to be underway in one of the banks
1. Banks are ignoring the systemic risks in the CRE and the auto dealerships. For instance, $OZK roughly has $28.6 billion in CRE exposure, which is 584% of its total equity of $4.9 billion.
2. According to a latest S&P report, the banking industry's auto loan delinquency ratio rose to 3.13% from 3.05% in the previous quarter and 2.95% in the prior-year period. Delinquent auto loans totaled $16.18 billion, up from $15.81 billion at June 30 and $15.89 billion at Sept. 30, 2023.
3. According to the FDIC's 3Q banking profile, the number of banks on the list of problem banks increased by two in the third quarter to 68 banks, while total assets held by problem banks increased $3.9 billion to $87.3 billion.
4. While Credit card, CRE, and auto loan delinquencies get the attention, most ignore the critical floor plan delinquencies and defaults by the dealers.
5. According to our multiple sources, several dealerships are defaulting on the floor plan loans already.
6. FDIC's latest banking profile shows continued weakness in credit card, auto, CRE, and multifamily housing portfolios. We expect the CRE, and auto defaults to impact the commercial banking sector in 2025-2026.
