Maturing Debt Could Strangle Banks (C, BAC, JPM)

According to a report from Moody’s Investors Service, banks could see about $10 trillion in maturing debt by 2015, and as much as $7 trillion by 2012.

Banks must now turn their attention from the overwhelming compilation of bad assets that they have been dealing with over the past few years, to the trillions in expected debt that will be maturing over the next few years.

This situation is a result of all the cheap borrowing that took place among banks during the credit-boom during the middle of the decade. The banks have continued to sell debt during the era of government financial backing; however they are doing so with far shorter maturities.

According to Moody's the average maturity rate of new debt for global banks fell to 4.7 years from 7.2 years over the last half decade. In the U.S., banks are seeing debt mature in 3.8 years from the 7.8 years rate five years ago.

Larger banks see no issue in being able to cover the debt, according to reports in the Wall Street Journal. Banks such as Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC) and JP Morgan (NYSE: JPM) should be able to refinance at an affordable rate due to the historically large amounts of cash that the banks currently have to cover the maturing debt.

Citigroup is expected to have $30 billion in debt coming due in 2010, $39.5 billion in 2011, and $59.3 in 2012. Bank of America will have to deal with debt in 2010 of $55.4 billion, with $35.3 billion and $58.4 billion coming due in 2011 and 2012 respectively. J.P. Morgan Chase & Co. faces about $130 billion maturing through 2012.

The report from Moody's did not include information on specific banks.

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