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Everyone wants to be the genius who bought back into U.S. banks at just the right time. So you'll hear a bunch of different theories about whether or not they're in good shape and how quickly they'll turn the corner.

But take a look at the fundamentals and you'll see that the picture they paint isn't pretty. Sure there will be quarterly earnings surprises that will make the banks look attractive, but it's going to take a long time for them to turn around.

Since 2008, U.S. banks have incurred $548-billion (U.S.) of loan losses, and in a new report Moody's Investor Service predicts there are $198-billion more to come. The rating agency has estimated total losses at $744-billion when the crisis is finally over, and the bulk of those will come from commercial real estate.

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In recent quarters some of these losses have been masked by higher capital markets revenues and gains from lower credit loss provisions that were set aside under worst-case scenarios. Going forward Moody's worries that the capital markets boom could die down, and that there won't be many more provisions from which to benefit.

Plus, the Fed has made it clear that interest rates aren't moving higher any time soon. That will hurt bank revenues because they make less money from lending out their low-cost deposits.

To understand how tough the banking environment is, remember that 150 U.S. banks failed in 2010. Tougher federal regulations aren't going to make it any easier for those on the brink of failure to stay afloat. More important, the two major economic factors that drive bank asset quality are unemployment and housing prices, and no one expects either of those to get much rosier any time soon.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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