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Wells Fargo says slump in oil prices could last longer

Wells Fargo & Co’s head of corporate banking has warned of stresses in the bank’s energy portfolio and said the slump in oil prices “feels deeper and broader and could last longer”, the Financial Times reported this week.

Wells Fargo has the largest exposure to oil and gas industry among the big U.S. banks, with its lending to the energy industry, accounting for about 2 percent of its overall loan portfolio in the third quarter ended Sept 30.

Kyle Hranicky, who spent nine years at the helm of the Houston-based Wells Fargo Energy Group before rising to head the corporate banking in May, said the bank had been in discussions with energy industry clients for several months about preserving cash and cutting borrowing limits, the FT reported.

Some oil and gas companies have the liquidity to survive the cycle, but others will be under significant stress and may be forced to sell assets or recapitalize, he said.

A recent U.S. regulatory review could force banks to scale back loans to energy companies whose revenues have been hit hard by falling oil prices, and could force more oil drillers into bankruptcy, industry analysts have said.

In related news, per barrel oil prices testing ‘ugly lows’

(Reporting by Nikhil Subba in Bengaluru; Editing by Shounak Dasgupta)

This article was from Reuters and was legally licensed through the NewsCred publisher network.