US consumers are borrowing like gangbusters and spending heavily in a post-Covid world of destination travel, luxury purchases and more personal freedom. Yet there are signs consumers are also becoming tapped out as Covid savings evaporate and US household debt rises, a sum now hovering around $17 trillion. That could be a disaster for US banks, according to analyst DICK BOVE, chief financial strategist at ODEON CAPITAL GROUP. Many of the thousands of small to medium-sized US banks specializing in consumer lending, could be in the eye of a financial storm in our rising interest rate environment, BOVE says. "We'll see more failures," he adds, referring to a a group of approximately 3,500 lenders.

In one telltale sign of consumer stress: A surge in negative equity in the auto loan sector. This rise in bad auto loans is being watched closely for the impact on several banks active in the sector. Meanwhile, Federal regulators have issued reports on a key rump of US banks following annual audits known as 'stress tests.' BOVE repeats an earlier warning that the tests do not properly sum up the latest financial health of the banks. "I am repeating my warning because the banks are in trouble," he says.

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