Using Veritas to Construct the "Per…

29-04-2017 Hits:38947 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:39739 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:39161 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:40916 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:40492 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:43049 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:27954 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:41677 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:41620 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:41858 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:43928 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:43318 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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This is the fifth in my series on what lies off balance sheet of your local big bank. Since the media doesn't seem to focus on these risks, and I have yet to see anything substantial from the sell side, I guess its left up to me to spread the word. The precursors to this are:
  1. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?
  2. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 2 - JP Morgan
  3. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 3 - Bank of America
  4. And the next AIG is... (Public Edition)
  5. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It? Pt 4 - Wells Fargo
Enter PNC Financial, the "off the books" edition!!!

Unconsolidated VIE (Variable interest entities) exposure

PNC's exposure to unconsolidated VIE's primarily consists of liquidity commitments of $6.3 billion and other credit enhancements of $.6 billion to Market Street, a multi-seller asset-backed commercial paper conduit. Other unconsolidated VIE exposure includes partnership interests in some low income housing projects and CDOs. Based on maximum exposure and the expected loss rate under each of these arrangements, we expect the loss from unconsolidated VIEs at $989 million (6.9% of the tangible equity).

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Market Street's activities primarily involve purchasing assets or making loans secured by interests in pools of receivables from US corporations that desire access to the commercial paper market. Market Street funds the purchases of assets or loans by issuing commercial paper.

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PNC loan sale and securitization activity

PNC sells commercial mortgage loans to FNMA and FHLMC. Under the sale agreements, PNC assumes up to one-third of the risk of loss on unpaid principal balances. As of June 30, 2009, the unpaid principal balance outstanding of loans sold as a participant in these programs was $19.8 billion and PNC's potential exposure to loss was $5.9 billion. Based on the cumulative losses rate for commercial mortgage loans in 2009 and 2010, we have arrived at expected loss of $512 million under the base case assumptions. The Bank already has created $108 million of reserves under loan losses for these agreements. Thus, the expected additional loss to be borne by PNC is $404 million (2.8% of the tangible equity).

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As of June 30, 2009, outstanding principal balances of loans transferred to the securitization QSPEs was $2.8 billion and the related liabilities were $2.2 billion. The loans are sold to the QSPE on a non recourse basis, subject to representations and warranties made at the time of sale. The retained interest in the securitization entities include seller's interest, interest only strips and retained asset backed securities.

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To value the retained interests, the Bank makes assumptions regarding expected credit losses. For valuing the interest only strips from credit card securitization, the expected annual credit losses were assumed at 6.77% (really wishful thinking!!!) while we expect the annualized credit charge offs rate for 2009 and 2010 at 14.0% and 11.6%, respectively. Since the bank loss rates are significantly lower than our expectations (not to mention significantly lower than the industry trend, which is probably below that deserved by the National City Acquisition), we expect additional loss of $39 million from fair valuation of the retained interest in credit card securitization. Similarly fair valuation of retained interest in auto loan securitization will result in loss of $0.4 million. Together, the fair valuation of the retained interests in credit card and auto loan securitization will result in loss of $39 million (0.3% of tangible equity).

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Per share impact of VIE and QSPE losses

Under the base case scenario we expect losses from unconsolidated VIE's and QSPE at $1,433 million or $3.1 per share. This is gross of the valuation in our latest PNC Subscriber Forensic Analysis below.

Free Links and Analysis Lite  More Intense Subscriber Analysis
 

PNC Report 050508 revised PNC Report 050508 revised 2008-08-30 06:38:42 711.95 Kb

spreadsheet  PNC Report_update final - Pro 2008-10-15 13:21:22 590.98 Kb

spreadsheet  PNC Report_update final - Retail 2008-10-15 13:21:38 337.21 Kb

pdf  PNC SCAP Results recast using FDIC and NY Fed data - Pro 2009-05-15 07:31:21 455.37 Kb

pdf  PNC SCAP Results recast using FDIC and NY Fed data - Retail 2009-05-15 07:30:25 395.18 Kb

spreadsheet  PNC Simulated Government Stress Test 2009-05-01 13:09:19 664.87 Kb

pdf  PNC Stress Test Pro 2009-04-13 02:10:17 3.11 Mb

spreadsheet  PNC Stress Test Retail 2009-04-13 02:11:08 323.51 Kb

pdf  PNC Stress Test update - Professional 2009-04-21 15:55:56 3.00 Mb

pdf  PNC Stress Test update - Retail 2009-04-21 15:53:52 777.50 Kb