More Write-Downs to Come in Loan Portfolios

From Mike Mayo, a Calyon Securities analyst formerly with Deutsche Bank:

"Given that securities portfolios have been written down closer to market values than loans, traditional banks with more loans seem to have the greatest regulatory risk as part of this process, given the potential requirement for large capital raises."

Mayo believes that the level of loan losses would be the main issue over the next couple of years and expects them to exceed the level of the Great Depression. He sees industry loan losses rising from a current 2% level, to 3.5%, "above 3.4% in 1934 or, under a stress scenario, at 5.5%."

Better take another look at that ALLL....