In many ways, FDIC-insured bank performance for the fourth quarter of 2007 ? the reporting period taking the brunt of the subprime mortgage and securitization mess ? is the worst in more than 15 years.
Fourth-quarter performance figures, released Tuesday in the Federal Deposit Insurance Corp.?s Quarterly Banking Profile, reported net income of the 8,533 FDIC-insured banks at its lowest ? $5.8 billion ? since 1991 and almost 84 percent under the fourth quarter of 2006. In addition, return on assets for the period was only 0.18 percent, down from 1.20 percent a year earlier ? the lowest quarterly figure since 1990.
“It?s pretty bleak,” area banking analyst Dean Silverman of John Ryan International Co. said of the report. “The interesting thing, however, is that the losses are fairly concentrated in the big banks. So the ?smart money? seems to have screwed up more than the smaller banks.”
Much of the report?s metrics were downbeat, and some were extensive: trading losses of $10.6 billion, down from a $4 billion gain for the same period in 2006; $31.3 billion set aside for loan losses, a quarterly record; net charge-offs almost double that of the fourth quarter of 2006; and an ebbing tide that left 51.2 percent of banks with lower quarterly net incomes and 57.1 percent with lower quarterly returns on assets, year-over-year.
Net interest income for the quarter, however ? one of the report?s few bright spots ? increased $9.7 billion year-over-year, or 11.8 percent.
But net income for the year ? at $105.5 billion ? was down $39.8 billion, and only 49.2 percent of banks reported improved earnings in 2007. It was the first time since 2000 that annual bank income had declined.
“Despite report numbers that were not on the upswing, Maryland banks are still ready and able to meet the needs of their customers,” said Maryland Bankers Association spokeswoman Alison Tavik.
Attributing most of the decline to a small number of large institutions, the FDIC announced that “institutions associated with subprime mortgage lending operations and … engaged in significant trading activity were among those reporting the largest earnings declines.”
Accordingly, many Maryland-area banks ? M&T, Provident, Chevy Chase, PNC ? showed decent, though generally lower, year-over-year fourth-quarter 2007 net incomes. First Mariner, however, showed a $10.5 million loss.
“In spite of the economy, we earned $411 million in the fourth quarter,” BB&T spokesman Bob Denham said. “Unlike some others, we did not engage in exotic loans.”
