The post September 11 problems at Bank of New York (BNY) are not confined to the loss of operational facilities, it seems. BNY announced today that it anticipates making a $390 million provision and a related $240 million loan loss charge in Q4, principally on aircraft leases to United Airlines and other US domestic carriers.
Though the provision and charge include $75 million of write-offs on several non-aircraft industry-related loans to a retailer, an insurance company and a cable credit – the bank is adding $50 million to its allowance for loan losses – the bulk of the problems are in its lending to airlines. BNY says it has $761 million of airline leasing exposure, $414 million of it to major U.S. carriers. Following a provision of $225 million (included in the $390 million) and an associated charge of $125 million, and considering previous reserves, the Company says it has substantial reserves available to cover its remaining exposure of $289 million to major U.S. carriers.
Following these actions the Company estimated its non-performing assets at year-end to be $441 million. This is down 20 percent from the end of the third quarter, but the new measures have raised its loan loss reserves to non-performing assets ratio from 1.24 to 1.88x in the same period, and its loan loss reserves to total loan ratio to 2.4 per cent, up from 2.0 per cent at the end of the third quarter.
“While taking this large provision is disappointing, this action adequately reserves for the credit risk in our entire portfolio, in particular airlines,” explains Thomas A. Renyi, the Company’s Chairman and CEO. “Given our actions today, we are confident about the credit outlook for our portfolio as we enter 2003 and we remain committed to our aggressive risk reduction efforts.”