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Wednesday, November 28, 2007

Bad Banker Report

FDIC publishes the Quarterly Banking Profile report (pdf), aka the Bad Banker report. Skimming this will make you want to find a banker and whap him with a rolled-up newspaper. Be gentle, they're emotionally fragile at the moment:
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.
...
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.
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.

Comments:
It is good to be diversified even if you are below the limit; FDIC insures your deposit, but does not guarantee when you'll be able to _access_ your deposit ... it takes time to resolve a banking failure, after all.
 
Yes, it is. The covered people usually get at least 5-10 thousand within 10 days, but it sure is nice not to have to depend on that.
 
Skimming this will make you want to find a banker and whap him with a rolled-up newspaper. Be gentle, they're emotionally fragile at the moment:

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.
 
On the other hand, they keep sending out zero interest invites for credit cards.

Or at least to my cardboard box over the steam vent.
 
FDIC gearing up:

http://tinyurl.com/2l3rw4

Office of Thrift Supervision gearing up:

http://tinyurl.com/2r88vd
 
Vader - but the cardboard box is in a very attractive area and the OFHEO HPI shows that its price is rising rapidly.

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.
 
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