Earlier we reported that Wells Fargo may have an energy problem because as CFO John Shrewsbury revealed, of the $17 billion in energy exposure, “most of it” was junk rated.
But, while one can speculate what the terminal cumulative losses, cumulative defaults and loss severities on this loan book will be, at least Wells was honest enough to reveal its energy-related loan loss estimate: it was $1.2 billion, or 7% of total – as Mike Mayo pointed out, one of the highest on the street. Whether it is high, or low, is anyone’s guess, but at least Wells disclosed it.
Citi did not.
Yes, the bank did disclose its holdings to the oil and gas sector at $21 billion funded and $58 billion which included unfunded (watch that unfunded exposure collapsing and shrinking the available pool of shale company liquidity in the coming weeks), and it did announce that it “built roughly $300 million of energy-related loan loss reserves this quarter”, but paradoxically one thing it did not disclose was its total reserves to energy.
Note the following perplexing exchange between analyst Mike Mayo and Citi CFO John Gerspach: