April 24, 2024

You are here: Home / Archives for problem banks

Fewer Banks In the U.S. Considered To Be at Risk

August 24, 2011 by Leave a Comment

The number of banks on the government’s list of institutions most at risk for failure fell in the second quarter, the first drop since before the financial crisis began.

Twenty-three lenders came off the list of so-called problem banks during the second quarter, bringing the total to 865, according to data released Tuesday by the Federal Deposit Insurance Corporation. Not all the troubled lenders will inevitably fail, but the F.D.I.C. considers them most at risk, making the quarterly update one of the clearest measures of the banking industry’s health.

It was the first decrease in the number of problem banks since the third quarter of 2006. 

The report also contained other signs of improvement. There were 48 bank failures in the first half of 2011, far fewer than the 86 failures in the first six months of 2010. Last year’s total of 157 collapsed banks was the highest since the last severe recession, in the early 1990s.

 And the F.D.I.C. insurance fund that protects the nation’s depositors showed a surplus for the first time in two years. It stood at $3.9 billion, compared with a negative $1 billion balance at the end of the first quarter.

Still, the magnitude of problem banks — roughly one of every nine lenders — remains relatively high. And the number could rise again if the economy suffered another downturn, a prospect that seems increasingly likely amid all the grim data that has surfaced in the weeks since the list was compiled at the end of the June.

Martin J. Gruenberg, the acting F.D.I.C. chairman, played down that risk in some of his first public remarks since being nominated to run the agency in June.

“Banks have continued to make gradual but steady progress from the financial turmoil and severe recession that unfolded from 2007 and 2009,” Mr. Gruenberg said in a statement.

Beyond the drop in problem lenders, there were other signs that the industry was getting back on its feet. The nation’s 7,513 banks and savings institutions reported a total profit of $28.8 billion in the second quarter, up nearly 38 percent from a year ago and the eighth consecutive quarter that earnings have increased. Bank losses continued to ease, while loan balances rose — albeit slightly — for the first time since the second quarter of 2008.

Much of the uptick in lending could be attributed to loans made to businesses and other financial institutions. Real estate lending continued to be very weak.

Total revenue fell for the second quarter in a row. Fee income declined as more stringent regulations curbed overdraft charges and other penalty fees, while interest income was lower because of an increase of money in low-yielding accounts at Federal Reserve banks.

The recent market turbulence from the debt crises in Europe and the United States continues to weigh on the industry. Deposits increased almost 3 percent during the second quarter, with the bulk of the cash going into the nation’s largest banks.

“Recent events have reminded us that the U.S. economy and U.S. banks still face serious challenges ahead,” Mr. Gruenberg said in the statement.

Article source: http://feeds.nytimes.com/click.phdo?i=28c3667a899e55ed3ee2dd3826f854cb

Filed Under: Economy News Tagged With: , ,

First Drop in Number of Problem U.S. Banks Since 2006

August 23, 2011 by Leave a Comment

The number of banks on the government’s list of institutions most at risk for failure fell in the second quarter, the first drop since before the financial crisis began.

Twenty-three lenders came off the list of so-called problem banks during the second quarter, bringing the total to 865, according to data released Tuesday by the Federal Deposit Insurance Corporation. Not all of the troubled lenders will inevitably fail, but the F.D.I.C. considers them most at risk, making the quarterly update one of the clearest measures of the banking industry’s health.

It was the first decrease in the number of problem banks since the third quarter of 2006. 

The report also contained other signs of improvement. There were 48 bank failures in the first half of 2011, far fewer than the 86 failures in the first six months of 2010. Last year’s total of 157 collapsed banks was the highest level since the last severe recession in the early 1990s.

 And the F.D.I.C. insurance fund that protects the nation’s depositors showed a surplus for the first time in two years. It stood at $3.9 billion, compared to a negative $1 billion balance at the end of the first quarter.

Still, the magnitude of problem banks — roughly one of every nine lenders — remains relatively high. And the number could rise again if the economy suffers another downturn — a prospect that seems increasingly likely amid all the grim data that has surfaced in the weeks since the list was compiled at the end of the June.

Martin J. Gruenberg, the acting F.D.I.C. chairman, played down that risk in some of his first public remarks since being nominated to run the agency in June.

“Banks have continued to make gradual but steady progress from the financial turmoil and severe recession that unfolded from 2007 and 2009,” Mr. Gruenberg said in a statement.

Beyond the drop in problem lenders, there were other signs that the industry is getting back on its feet. The nation’s 7,513 banks and savings institutions reported a total profit of $28.8 billion in the second quarter, up nearly 38 percent from a year ago and the eighth straight quarter that earnings have increased. Bank losses are also easing and loan balances grew for the first time since the second quarter of 2008. Bank losses continued to ease, while loan balances rose — albeit slightly — for the first time since the second quarter of 2008.

Much of the uptick in lending could be attributed to loans made to businesses as well as other financial institutions. Real estate lending continued to be very weak.

Total revenue fell for the second quarter in a row. Fee income declined as a result of more stringent regulations curbing overdraft charges and other penalty fees, while interest income was lower because of an increase of funds in low-yielding accounts at Federal Reserve banks. The pressure on revenue could get ratcheted up in the second half of the year if lending margins collapse in light of Fed’s recent pledge to keep interest rates near zero for the next two years.

Meanwhile, the recent market turbulence stemming from the debt crises in Europe and the United States continues to weigh on the industry. Deposits increased by almost 3 percent during the second quarter, with the bulk of the cash flooding accounts at the nation’s largest banks.

“Recent events have reminded us that the U.S. economy and U.S. banks still face serious challenges ahead,” Mr. Gruenberg said in a statement. “The F.D.I.C. will remain alert to the challenges going forward.”

Article source: http://www.nytimes.com/2011/08/24/business/first-drop-in-number-of-problem-banks-since-2006.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: As Bank Woes Ease, F.D.I.C. Fund Nears Positive Territory

May 24, 2011 by Leave a Comment

After three years of small financial institutions falling like dominoes, bank troubles are easing, and the development is expected to help push the government-administered insurance fund that protects depositors into positive territory next month.

Only four lenders were added to the government’s list of so-called problem banks in the first quarter, bringing the total to 888 from 884, the Federal Deposit Insurance Corporation said on Tuesday. That is the smallest increase since the financial crisis began and one of the clearest signs yet that the banking industry is returning to health.

The F.D.I.C. fund that is used to protect depositor, which slipped into the red for the first time in September 2009, is now expected to be replenished by the end of June.

The agency offered a relatively upbeat assessment for the nation’s 7,574 lenders in its quarterly report card released on Tuesday. Sheila C. Bair, the F.D.I.C. chairwoman said in a statement that the industry showed “continuing signs of improvement.”

Still, she underscored that banks still had plenty of work ahead as they contended with an anemic economy, still-fragile housing market and the possibility of interest rate shocks in the months ahead.

“The process of repairing bank balance sheets is well along, but is not yet complete,” Ms. Bair said during one of her last news conferences as F.D.I.C. chairwoman. Earlier this month, she announced that she would step down at the end of her five-year term in early July.

The banking industry posted a $29 billion profit in the first quarter, a 67 percent increase from the $17.4 billion it reported in the period a year earlier, and its best quarterly result since the start of the crisis.

The bulk of those gains came as the nation’s biggest lenders set aside less money to cover loan losses or drew down their reserves. Smaller banks, those with assets under $1 billion, continue to add money to their reserves.

Over all, the industry remains under pressure from sluggish revenue growth, held back by a slowdown in mortgage lending, weaker trading results and increased regulation of credit and debit card fees.

Revenue for the group was about 3 percent lower than in the period a year earlier. It is only the second time in 27 years that the industry has reported a year-over-year decline in revenue.

To be sure, there have been some signs that the credit spigot is starting to open. Consumers are feeling better about the economy. Banks have been gradually easing their lending standards. While many loans were to overseas borrowers and foreign banks, there has been a modest uptick in corporate lending, according to recent reports.

“We made face the risk of the pendulum swinging too far back in other direction, with banks having incentives to substantially relax lending standards in the pursuit of scarce loans,” Ms. Bair warned in her remarks

Federal policy makers are trying to strike a balance between prodding the banks to lend more to revitalize the economy, while urging them to keep more capital on hand in case of another financial storm.

The number of bank failures appears to have topped out at 157 in 2010, the highest level since the nation’s last severe recession in 1992. But despite the hundreds of institutions on the government’s list of problem banks, not all will be destined to disappear.

There were just 26 failures in the first quarter, and F.D.I.C. officials have said they expect bank seizures — both in terms of the size of the institutions and their number — to be lower this year.

That also bodes well for the restoration of the F.D.I.C. insurance fund. At the end of March, it carried a negative balance of $1 billion. That is a sharp improvement from a negative balance of $7.4 billion at the end of 2010.

Ms. Bair has said that the agency should be able to replenish the account through higher insurance premiums and a special assessment imposed on the banking industry. The agency also expects the cost of resolving troubled banks to be lower in the near future.

“Barring unforeseen circumstances,” Ms. Bair said, the federal deposit insurance fund “balance at June 30 should turn positive, after seven quarters in the red.”

Article source: http://feeds.nytimes.com/click.phdo?i=172a9e0f0bb218daaedad1ceea92f68d

Filed Under: Business News Tagged With: , ,