Poor quarterly results from banks across the US over the past two weeks suggest credit problems once confined to high-risk mortgage borrowers are spreading across the consumer landscape, posing new risks to the economy and weighing heavily on the markets.<\/p>\n
US banks have raised reserves for loan losses by at least $6bn over the second quarter and by even larger amounts from last year, indicating financial executives believe consumers will be increasingly unable to make payments on a variety of loans.<\/p>\n
Banks are adding to reserves not just for defaults on mortgages, but also on home equity loans, car loans and credit cards.<\/p>\n
\u201cWhat started out merely as a subprime problem has expanded more broadly in the mortgage space and problems are getting worse at a faster pace than many had expected,\u201d\u009d said Michael Mayo, Deutsche Bank analyst.<\/p>\n
\u201cOn top of this, there is an uptick in auto loan problems, which may or may not be seasonal, and there is more body language from the banks that the state of the consumer was somewhat less strong [than thought].\u201d\u009d<\/p>\n