What happened?
A key theme through bank earnings is oil exposure. Oil companies were the perfect banking clients, as the industry relies on the continuous injection of fresh capital to drill new wells in the hunt for black gold. The only problem is that a barrel of oil sells for about $27, making banks' ordinarily low-risk loans to oil companies a big risk to earnings.

Recently, Cullen/Frost Bankers (NYSE:CFR), Huntington Bancshares (NASDAQ:HBAN), BB&T (NYSE:BBT), and KeyCorp (NYSE:KEY) have specifically called out oil exposure in their earnings reports and discussions with analysts. Here's a quick breakdown.

Does it matter?
There's no doubt about it. On a conference call, one banker recently said, "Thank god we're in New York and Florida and not other parts of the country that have energy problems to worry about." This is just another sign of how troublesome energy loans have become.

Banking is inherently a low-margin business. A complete loss on a $1 million bad loan can easily wipe away the profits on $100 million of good loans. One way to get a sense of a bank's risk is to look at its allowances as a percentage of its loans. The higher the allowances, the more a bank expects to lose from future loan losses. 

The table below includes the amount of energy loans at some of the nation's regional banks, and the reserves set aside against losses, based on public disclosures.


Amount of energy loans

Amount of allowance or reserve

Cullen/Frost Bankers

$1.79 billion (or about 6.3% of total assets as of the third quarter of 2015)

It's uncertain, given it won't report until Jan. 27. However, it pre-announced that it provisioned $34 million toward loan losses in the fourth quarter, largely driven by energy loan exposure. That provision is equal to about 2% of its energy loans.

Huntington Bancshares

 "0.5% of total loans" are to exploration and production companies, per the recent conference call.  Huntington Bank built a 6% reserve against loans to E&P companies. 


$1.4 billion (0.7% of total assets)

BB&T built an allowance for losses against oil and gas loans at about 5% of O&G loans outstanding.


$1.2 billion (roughly 1.3% of total assets)

KeyCorp has reserved 6% of its energy loans for losses. 

Sources: Company IR, conference calls.

Cullen/Frost Bankers hasn't yet reported earnings for the calendar fourth quarter, but the Texas-based bank is undoubtedly one of the most exposed -- and the market has taken notice. We won't know for another week or so if Cullen/Frost's relatively light provisions of $34 million this quarter are adequate, as it could be low due to the reversal of provisions elsewhere. What I can say, though, is that it's usually not a good sign when a company pre-announces a key earnings detail to the market.

KeyCorp can proudly boast about its modest energy exposure. KeyCorp dedicated a full slide in its earnings presentation to its oil and gas loans, which make up about 1.3% of its total assets. Notably, most of its loans are to exploration and production companies, which are typically better hedged to declines than oil services companies.

BB&T noted that it didn't experience any delinquencies, nonaccruals, or loan losses in its oil and gas book this quarter. However, its allowance for losses stands at a beefy 5% of loans, which indicates that the bank expects losses to come with time.

Finally, we have Huntington Bancshares, which has some of the least exposure. Like KeyCorp, it made a point to avoid loans to services companies, which have proven to be the most affected by the downturn in energy prices. Either way, it's reserving for losses much like its peers, having built up reserves equal to 6% of its energy-related loans.