US banks prepare for oil and gas company loans to worsen

New York

US BANKS are setting aside more money to cover bad loans to energy companies after oil prices plunged over the last year, raising the possibility that deteriorating loans could start to weigh on their earnings, some analysts said.

Loan credit quality for US banks has been improving since the financial crisis. In the first quarter, 2.49 per cent of loans on banks' books were delinquent, the lowest level since the fourth quarter of 2007, according to the Federal Reserve, which hasn't released second-quarter data. The rate peaked at 7.4 per cent in the first quarter of 2010.