Regional Banks Prepare for Worst

Big Boosts in Loan-Loss Reserves Contribute to Weak Quarterly Earnings

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BY MATTHIAS RIEKER

Banks, reporting declines in quarterly profits because of souring loans, are bracing themselves for worse.

Several large regional banks reporting earnings Thursday disclosed that they have become more aggressive in setting aside capital for future loan losses. The provisions are because of the deterioration in the economy over the past three months and strongly suggest that future loan losses will mount.

While most investors and analysts have been expecting loan losses to worsen, the significant increase in provisions for current and future loan losses took many analysts by surprise.

Regulations have prevented bankers from building reserves during flush times. The ...

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