Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, March 8, 1990 TAG: 9003081564
SECTION: BUSINESS PAGE: C6 EDITION: METRO
SOURCE: DAVE SKIDMORE ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Medium
The nation's commercial banks earned $16.3 billion, down from a record $24.8 billion in 1988, the Federal Deposit Insurance Corp. said Wednesday.
The contrast between the first six months of the year and the last half was dramatic. In the January-June period, banks posted $14.3 billion in earnings, the best ever for six months, compared with a weak $2 billion in the final half.
Fourth quarter earnings were held to $2.7 billion after the industry set aside $8.4 billion to cover losses on domestic loans. Most of the problems centered on real estate development lending, but the percentage of sour consumer loans edged up for the fifth consecutive year to 1.6 percent.
In the third quarter, big banks set aside $7.6 billion to cover Third World debt losses, producing a rare loss for the industry of $740 million. It was the worst showing since the second quarter of 1987, when a previous round of reserving for developing country loans caused a $10.6 billion loss.
Banks in the oil-producing Southwest continued to recover slowly from the oil and real estate busts earlier in the mid-1980s, but Northeastern banks deteriorated sharply. Western and Midwest banks showed strong gains and Southeastern institutions held steady.
Bad real estate loans more than doubled in the Northeast, where four states were among the 10 with the highest percentage of sour real estate loans.
Despite the problems, banks continued to pour money into real estate lending, particularly in the Southeast and West. Real estate lending increased 12.8 percent nationally, compared with a 5.4 percent growth rate for bank assets generally.
`Economist Paul Getman of Regional Financial Associates of Philadelphia said, "I think you're going to get more bad news . . . particularly in the Southeast in Florida, Georgia, the Carolinas because there was a lot of speculative buying there."
However, the chairman of the FDIC, L. William Seidman, predicted that the industry's performance would improve this year, at least in the first six months, and that fewer banks would fail during 1990 than last year.
In another positive sign, the list of "problem" banks, which the FDIC uses to predict bank failures, stood at 1,093 at the end of 1989, down from 1,394 a year earlier and 1,559 at the end of 1987.
by CNB