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12% of US banks on the brink
By Marcy Gordon |
February 25, 2011, Friday
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Print Edition
THE number of banks at risk of failing made up nearly 12 percent of all federally insured banks in the United States in the final three months of 2010, the highest level in 18 years.
The Federal Deposit Insurance Corp said Wednesday that the number of banks on its confidential "problem" list rose to 884 in the October-December quarter, up from 860 in the previous quarter. Those are banks rated by examiners as having very low capital cushions against risk.
Twenty-two US banks have failed so far this year. And more banks are at risk, even as the FDIC reported the industry's highest earnings as a group since the financial crisis hit three years ago.
Only a small fraction of the 7,657 federally insured banks - about 1.4 percent with assets of US$10 billion-plus - are driving the bulk of the earnings growth. They are the largest banks, including Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co and Wells Fargo & Co.
The big banks accounted for about US$20.6 billion of the industry earnings of US$21.7 billion in the fourth quarter. The total earnings compared with a net loss of US$1.8 billion in the same quarter of 2009. The agency said bank earnings were buoyed in the latest quarter by reduced charges for soured loans.
Most of the big banks have recovered with help from federal bailout money and record-low borrowing rates. On the other side, many smaller banks are struggling.
Last year, 157 US banks were brought down by the soured economy and mounting loan defaults. That was the most in one year since 1992, the height of the savings and loan crisis. They were mostly smaller or regional banks. The failures compare with 25 in 2008 and three in 2007. They cost the federal deposit insurance fund an estimated US$21 billion in 2010.
Overall, banks' net income reached a three-year high of US$87.5 billion in 2010. That contrasted with a loss of US$10.6 billion in 2009.
But FDIC chief Sheila Bair said banks need to lend more vigorously as the economy recovers. Bank industry revenue remained fairly strong through the financial crisis, Bair noted, but there is little "upward momentum."
The Federal Deposit Insurance Corp said Wednesday that the number of banks on its confidential "problem" list rose to 884 in the October-December quarter, up from 860 in the previous quarter. Those are banks rated by examiners as having very low capital cushions against risk.
Twenty-two US banks have failed so far this year. And more banks are at risk, even as the FDIC reported the industry's highest earnings as a group since the financial crisis hit three years ago.
Only a small fraction of the 7,657 federally insured banks - about 1.4 percent with assets of US$10 billion-plus - are driving the bulk of the earnings growth. They are the largest banks, including Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co and Wells Fargo & Co.
The big banks accounted for about US$20.6 billion of the industry earnings of US$21.7 billion in the fourth quarter. The total earnings compared with a net loss of US$1.8 billion in the same quarter of 2009. The agency said bank earnings were buoyed in the latest quarter by reduced charges for soured loans.
Most of the big banks have recovered with help from federal bailout money and record-low borrowing rates. On the other side, many smaller banks are struggling.
Last year, 157 US banks were brought down by the soured economy and mounting loan defaults. That was the most in one year since 1992, the height of the savings and loan crisis. They were mostly smaller or regional banks. The failures compare with 25 in 2008 and three in 2007. They cost the federal deposit insurance fund an estimated US$21 billion in 2010.
Overall, banks' net income reached a three-year high of US$87.5 billion in 2010. That contrasted with a loss of US$10.6 billion in 2009.
But FDIC chief Sheila Bair said banks need to lend more vigorously as the economy recovers. Bank industry revenue remained fairly strong through the financial crisis, Bair noted, but there is little "upward momentum."
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