Wells Fargo's (WFC) loan exposure to the battered oil and gas industry includes $25 billion in credit lines that customers haven't yet used, an amount that more than doubles its previously disclosed risk.
The total of $42 billion in oil and gas credit reported today in a presentation on the San Francisco-based bank's website, shows that its vulnerability to falling crude prices is on par with rivals who had reported much larger figures. Citigroup (C) has the largest exposure of the big U.S. banks, at $58 billion, followed by Bank of America (BAC) with $43.8 billion and JPMorgan Chase (JPM) at $42 billion.
On a call with investors last month, Chief Financial Officer John Shrewsberry said that the company had $17 billion of loans to the energy industry. In today's presentation, Wells Fargo noted that the previously disclosed figure didn't include unfunded loan commitments -- such as corporate credit lines that haven't been drawn upon.
Wells Fargo has set aside $1.2 billion of reserves against its oil and gas loans, equating to 6.7% of the total outstanding. When stacked against the total exposure including unfunded loans, however, the ratio drops to 2.8%.
Loan commitments are important to consider when evaluating a bank's energy coverage, because it's in times of the deepest stress that companies are most likely to draw down their credit lines.
Yesterday, New York crude futures fell 3.9% to $29.69 a barrel. As recently as 2014, they were above $100.
The potential for losses on energy loans has become one of the top concerns for bank investors and a key driver of the 19% plunge so far this year in the KBW Bank Index. Wells Fargo shares have dropped 15%, including a 0.6% loss today.
Still, TheStreet's Jim Cramer, whose Actions Alerts PLUS charitable trust holds stock in Wells Fargo, said banks are in better shape than the markets are indicating.
"They are going to make an immense amount of money," he said in a Real Money column on Monday. "They just can't demonstrate it and no one seems to trust their earnings power. It's almost as if we are back to the old days -- bad loans in oil and gas, which seem like bad loans in housing but with less collateral."
Exclusive Look Inside: Jim Cramer's Action Alerts PLUS portfolio includes both Wells Fargo and Bank of America shares. Want to be alerted before he sells either one? Learn more now.
Angst over the state of the oil patch grew this week as Oklahoma City-based producer Chesapeake Energy hired law firm Kirkland & Ellis as an adviser, triggering fears that a debt restructuring might be in the offing. While the company issued a statement saying it had no current plans to file for bankruptcy, the stock remains down 57% this year.