Bank executives around the Baltimore area are keeping an eye on the markets after an historic two weeks threatened the security of the nation’s credit market.
In a reminder that the nation’s banks are still suffering, Washington Mutual Inc. collapsed Thursday in the biggest U.S. bank failure in history. Although WaMu’s failure was expected, it nonetheless underscored for investors how widespread the problems are in the financial sector.
“I’ve never seen anything remotely close to this,” said Ed Hale, chairman and chief executive officer of 1st Mariner Bank. “It just seems that there’s a surprise a minute, big surprises, institutions that you’ve done business with forever are gone.”
The most recent failure was not a surprise, as Washington Mutual had been on the government’s watch list of troubled banks, said Elinda Kiss, a professor and banking expert at the University of Maryland.
However, she said the good news was that the bank’s assets were sold to JPMorgan for $1.9 billion, meaning its failure won’t have to be covered by the Federal Deposit Insurance Corp.
“I think everyone knew WaMu was on the watch list, they even put themselves up for auction,” Kiss said. “To be perfectly honest, I was expecting it a couple weeks ago — before the Lehman Brothers [bankruptcy].”
Locally based banks and major players in the Baltimore markets reported a positive second quarter, as each reported profits or narrowed their losses. Provident Bank saw a net income of $10.2 million, and earnings per share of 27 cents, while 1st Mariner Bank reported a loss of $469,000, an improvement on its $3.86 million net loss during the same quarter in 2007.
Buffalo, N.Y.-based M&T Bank’s net income slid to $160 million, down from $214 million a year ago, while PNC saw its quarterly net income grow to $505 million from $423 million.
Provident Chairman and CEO Gary Geisel said the bank expects the tough credit conditions will continue through most of 2009, but that it is focused on maintaining adequate capital and liquidity levels.
“We’ve been pleased that despite the turmoil in the financial markets, the operations of our bank have remained very stable,” Geisel said in a e-mail. “We are still seeing good lending opportunities.”
Chris Holt, Susquehanna Bank’s regional president, said local community banks were “getting painted with the same brush” as larger investment houses, causing widespread uncertainty. However, he believes small banks would be spared the worst of the current storm, as would larger national banks like Bank of America and Wachovia.
“I think there will be some more additional banks that will fail, but I’m not aware of any big ones in trouble,” he said.
The Associated Press contributed to this story.
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