Wednesday, November 28, 2007
Bad Banker Report
Rising levels of troubled loans in all major loan categories, but most notably in residential mortgage portfolios, led to a steep jump in expenses for bad loans in the third quarter. These higher costs, combined with sharply lower trading revenue, caused industry earnings to fall 24.7 percent from a year ago to $28.7 billion — the lowest level for industry earnings since the fourth quarter of 2002. This is the first time since 2003 that quarterly earnings have been below $30 billion. The industry’s return on assets (ROA) for the quarter was 0.92 percent, the lowest ROA since the fourth quarter of 1992.My life has not been wasted. Bank presidents who hated me a few years ago now evince a warm friendship. On the other hand, those ten institutions must be in truly wretched shape, right? Unfortunately, more are destined to join them. The collapse in commercial (see CR) and construction & development loans is now going to move on to beat up quite a few regionals. So do pay attention to that FDIC logo and the insurance limitations. I successfully forced my brilliant physicist brother to redistribute his money. Please do the same.
However, most of the decline was attributable to results at a relatively few large institutions. Ten institutions accounted for more than half of the decline in industry earnings.
Please be gentle. My sister, a banker, returned to the workforce on Monday and they put a hiring freeze in place before she'd even entered the building (she still has the job though).
Further, I have created a chart of the percentage of nonprofitable FDIC Savings Institutions going back to 1990 if anyone is interested.
Or at least to my cardboard box over the steam vent.
Office of Thrift Supervision gearing up:
Shellac that thing, and you can probably get a cash out refi.
Anon - but not by enough, and not quickly enough. The Bad Banker report pretty clearly shows that the next wave is coming. Those C&I loan defaults combined with the oncoming wave of C&D defaults are going to hit another tier of banks in the next two quarters.