US Regional Banks Feeling the Pain
There’s a big divergence in performance among regional U.S. banks, with some doing much better than others. As a group, though, the regional banks are far from immune to the credit crisis and severe recession, according to Standard & Poor’s Credit Research.
Higher net interest margins helped many of the regional banks achieve higher net interest income in the fourth quarter. But this was offset to a large degree by sharply rising provisions for loan losses.
However, as the economic recession deepens into 2009, we believe that all of these banks and thrifts will see their asset quality deteriorate and their earnings pressured.
Nevertheless, we expect the magnitude of the deterioration to vary by company and this relative performance differential to remain pronounced.
The most distressed areas for residential construction loans, and by extension local banks, continued to be Florida, California, Nevada, Arizona and Georgia.
S&P expects a sharp rise in provisions for commercial real estate loans in 2009, especially related to retail, office and hospitality properties.
The ratings agency said government programs helped liquidity and capital at the banks at the end of 2008. Nevertheless, ratings actions have largely been negative in 2009, with two downgrades in January for Wilmington Trust Corp. (NYSE: WT) and Colonial BancGroup Inc. (NYSE: CNB) and an upgrade for FirstMerit Corp. (NASD: FMER).
For details see “U.S. Regional Banks’ Performances Are Mixed, But Most Feel The Pain.”
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