"Falling oil price poses new threat to banks"

One of the reasons the big banks, despite showing a bit of promise in November, have not caught a bid. XLF is the S&P Financial Sector ETF:

FinViz

The 50-day moving average and the late October gap should be taken out today with the next possible stopping point at the congestion from September at $23.25.
Be wary of a bounce before then as it could just be setting up a sloppy head-and shoulders. There is no reason to chase, $23.92 at the close yesterday.

From the Financial Times:

Outstanding loans to energy sector could cause large-scale losses

The world’s big banks would like to draw a line under their recent troubles. The losses from the financial crisis, the costs of regulatory change and the fines from mis-selling and market manipulation scandals appear largely in the past.

For once, another sector is suffering a series of blows. Within a matter of months, the falling oil price has wiped as much as 25 per cent off the market values of the oil majors. But might the bankers be smiling too soon? Could the oil market turmoil become the banks’ next nightmare?

Last month, there was a hint of what might be around the corner, when it emerged that Wells Fargo and Barclays had exposure to big potential losses on an oil loan — specifically, $850m of funding granted earlier in the year to back the merger of US oil groups Sabine and Forest. Attempts to syndicate the loan had failed amid a falling oil price. The banks, which led the fundraising, were left holding mark-to-market losses estimated at as much as 40 per cent.

Since then, the oil price collapse has only worsened. Last week, Brent crude hit a new five-year low of barely $60. That is nearly 50 per cent down on its summertime peak. The slight rally on Monday — triggered by the closure of two Libyan terminals — reversed by the end of the day.

The trend is great news for consumers. And the big losers are equally obvious — namely, the oil majors. Less clear, but potentially more noxious, is the impact on the banks that have supported the industry’s breakneck expansion over the past few years.

That Sabine-Forest financing was just one of many. Oil and gas financing has spiralled over the past couple of years, dominating the riskier end of the bond market. According to data compiled by Barclays, energy bonds now make up nearly 16 per cent of the $1.3tn junk bond market — more than three times their proportion 10 years ago. Nearly 45 per cent of this year’s non-investment grade syndicated loans have been in oil and gas....MORE