Board-Ansicht
Mix-Ansicht- Nachtigal....... - XERXES, 21.12.2001, 11:27
- The Coming Meltdown - Toplevel, 21.12.2001, 11:48
Nachtigal.......
By Mary Kelleher
NEW YORK, Dec 20 (Reuters) - J.P. Morgan Chase & Co. Inc.'s <JPM.N> widening disclosure of more problems tied to bankrupt energy trader Enron Corp. <ENE.N> has tarnished the leading bank's reputation as a lender and angered Wall Street.
"A lot of people are mad," said Fox-Pitt, Kelton analyst Reilly Tierney."J.P. Morgan used all the credibility they have on this issue and they need to make sure from a reputational standpoint that there's nothing more that comes up. If it's limited to this, then the damage is contained."
The New York-based commercial and investment bank, one of Enron's biggest creditors and an adviser to the company on its recent failed merger plan with Dynegy Inc. <DYN.N>, told Wall Street on Wednesday night its secured exposure to Enron was $965 million, after announcing last month its secured exposure simply"included" $400 million in debt.
It also said it had about $500 million in unsecured exposure at the time.
J.P. Morgan's stock is down $1.41, or almost 4 percent, to $36.59, on Thursday on the New York Stock Exchange.
To get back money, it is suing some top insurers, including Chubb Corp. <CB.N> and CNA Financial Corp. <CNA.N>, that issued contracts, or surety bonds, guaranteeing Enron assets. The insurers claim they do not have to pay up on the surety bonds because Enron committed fraud, analysts said.
J.P. Morgan is certainly not the only bank with problem loans to Enron, and has been relatively forthcoming about the extent of its exposure. Citigroup Inc. <C.N>, for example, another top Enron creditor, has not divulged its risk.
But the sheer size of J.P. Morgan's exposure, its tangled web of obligations and its two-step disclosure process with Enron has made Wall Street wonder how such a big bank, known for its sound risk management, could get in such a jam.
"It's a black mark on credit and risk management," CS First Boston analyst Susan Roth said, although she added Enron's bankruptcy was not staggering blow to the bank.
Part of the problem is a push by large U.S. commercial banks like J.P. Morgan to use their massive balance sheets to make loans to companies while trying to win deals to help these companies with mergers and stock offerings, analysts said.
"The biggest issue for J.P. Morgan is that the whole Enron debacle has shown how incredibly risky their balance sheet strategy really is," Tierney said."They really want to use their balance sheet, use their position in the lending market, which is commanding, to try to pry their way into these equity and M&A businesses which are much higher yielding and require much less capital."
Banks usually make a loan, then use the lending relationship as a lever to get other business from a corporate customer, Tierney said. It would be presumptuous to say banks cut lending standards to curry favor, but the fact remains many banks have bad loans in the latest economic slump, he said.
Other analysts said it was too soon to tell if Enron problems show flaws in J.P. Morgan's lending practices.
"This company has gotten numerous kudos over the last few years," UBS Warburg analyst Diane Glossman said."Whether subsequent to the Russian debt default and market meltdown in 1998, or their relatively sanguine performance during the Asian problems before that, there are a number of instances where they are looked as as having come off better than their competition. It takes more than Enron to say 'their risk management doesn't work.'"
When asked on a conference call on Thursday if J.P. Morgan would alter its risk management practices in light of Enron and recent turnover in the bank's chief credit officer job,
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