Like a sexually-transmitted disease, the credit crisis is proving awfully hard to shake for the world's banks. Just when one outbreak subsides, the burning starts anew.
Having (more or less) fought off the last attack--that caused by the profligate borrowing of others--with trillions of government aid for medication and ointment, the banks now face a reckoning with their own profligate borrowing. According to Moody's Investors Service, about $10 trillion in bank debt comes due over the next six years, with the worst to come over the next three.
Like the American homeowner, the banks borrowed way too much over the past 10 years. But now, those partners' bonds are coming due, and new partners are less willing to get into bed with the banks, with maturities falling precipitously and interest rates sharply higher.
American and British banks are suffering the worst from the debt-issuing orgy. Already weakened by their last outbreak, U.S. banks have seen their average maturity drop by more than half to 3.2 years. British bank debt maturities have fallen from 8.2 years to 4.3 years. The global average is now 4.7 years, down from 7.2 years, which means borrowers would rather get down with banks just about anywhere else in the world.
Citigroup's bill over the next three years is $128.8 billion. JPMorgan Chase is looking at $130 billion in maturing debt. But, as always, Ken Lewis & Co. take the cake, with Bank of America facing almost $150 billion in maturing bonds by 2012.
On the other hand, America's two worst banks say they are in the best shape to deal with refinancing their debt. With historically high cash levels (thanks, Uncle Sam!), both say they have enough in the kitty to cover their maturing debt. JPMorgan seems less sure, telling Oppenheimer Equity Research earlier this month that it "has the flexibility to issue debt only when terms are favorable."
Banks Scramble as Debt Comes Due [WSJ]