Posted on 02/26/2008 4:38:57 PM PST by bjs1779
Profits at federally insured banks and thrifts plunged to a 16-year low in the fourth quarter as institutions set aside a record-high amount to cover losses from bad mortgages, data released Tuesday show.
The quarterly banking industry statistics, compiled by the Federal Deposit Insurance Corp., highlighted a dramatic deterioration in the fourth quarter as major Wall Street banks such as Citigroup Inc. took large write-downs in the value of their assets to reflect losses on mortgage-related investments.
"Weakness in the housing sector and the credit squeeze in financial market made it a very challenging time for many institutions," said Sheila Bair, the FDIC's chairman. "We can expect these problems to continue throughout 2008."
Bair also noted that the agency is planning to beef up its staff -- including temporarily hiring up to 25 retired FDIC employees who worked in the agency's more than 200-person division that handles failed banks -- to handle an anticipated increase in bank failures. She declined to predict the extent of bank failures this year.
Profits at the 8,544 FDIC-insured institutions between October and December dropped by 83.5 percent to $5.8 billion, hampered by soaring loan defaults and provisions for loan losses, the FDIC said. A year ago, these banks recorded $29.4 billion in profits.
Losses were concentrated in six large institutions, which accounted for more than half of the total decline in profits, the FDIC said.
However, FDIC officials said problems were also seen in community banks, with more than half of all banks insured by the FDIC reporting lower fourth-quarter earnings and half reporting growth in troubled loans.
(Excerpt) Read more at businessweek.com ...
That's encouraging. Drip drip drip
Pretty big news for no replies yet. LOL.
Most likely by raising fees and running scams to increase the likelihood of generating insufficient funds penalties.
Most stock prices these days seem based on some alien proposition that all well-run businesses need to rake in profits of 15-20% a year.
If the undermining of this notion results in stock prices coming down to reasonable levels and businesses charging just enough to make a basic profit, then that won't be such a bad thing.
Google's price collapsed because revenues ONLY went up 52%.
Talk about a bunch of slackers! /sarc
Bah. Doomers and gloomers, trying to talk the economy into a recession.
Nothing to see here. The credit implosion is contained to the sub-prime tranches. Never mind the chain-reaction de-leveraging happening across the whole US banking system.
The doomers and gloomers want you to pop some happy pills and listen to only happy thoughts.
Never mind the issue of commercial real estate loan concentration at small regional banks and thifts.
Just keep repeating the party line “Greatest Story Never Told.”
Do you have any links on the commercial real estate loans issue?
Sorry. I was running on to the bank...
Oh what the heck, BILLION DOLLAR BONUSES FOR ALL ANYWAYS!
Any words of wisdom/advise for the rest of us?
There’s a bunch of stuff I’ve seen out of the Fed and other analysts on the CRE (commercial real estate) concentration. It’s not tied up into one nice paper just at this time.
But here’s a USA Today article on the issue:
http://www.usatoday.com/money/industries/banking/2006-05-17-commercial-real-estate-usat_x.htm
Basically, the situation is this: as the mortgage brokers and money center banks squeezed more and more smaller banks out of the mortgage loan business, the smaller banks started catering to commercial real estate loan accounts.
Commercial real estate activity, esp. building of various mini-malls and the associated development that tail-ends some of this housing build-up is going to drop off or the projects are going to fail. As a result, some of these thifts and regional banks are going to have some real problems, really quickly, because they’ve over-committed their capital resources in some cases by 300%+.
Keep no more than $100K in any FDIC-insured bank.
They just had a spot on CNBC about this. Some expert (missed name) said 180-200b in losses in this so you may be onto something.
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