Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 26, 1992 TAG: 9201280390
SECTION: ECONOMY PAGE: 18 EDITION: METRO
SOURCE: MAG POFF BUSINESS WRITER
DATELINE: LENGTH: Medium
STATE OF BANKING REFLECTS ECONOMY
Once the bastion of growing and stable employment, banking has been hit in the 1990s by job freezes and layoffs. And there are indications the crisis has not yet passed.The reaction is to weakness in commercial real estate that for decades has been the industry's primary source of investment, plus a lack of appetite of business borrowers for money to finance new projects and inventory.
Analysts say that situation is unlikely to change in the foreseeable future. In 1992, Virginia banks, with varying degrees of success, will try to work their way out of their commercial loan problems.
"Those sorts of things are going to continue," said Guy Ford, industry analyst at Scott & Stringfellow Investment Corp. in Norfolk.
Revenue growth for the state's banks, he said, "is very slow and, in some cases, is shrinking."
That situation creates pressure to reduce costs, Ford pointed out, and "the major cost in banking is people."
The trend is exacerbated by "better and better technology each year." Ford said this increased computer power means that fewer people are needed by financial institutions.
Ford predicted the region's banks also will continue to merge,then act to curtail duplicate functions.
Ford said the reduction in employment is, therefore, more a function of changes unique to the banking sector than caused by the business cycle. It transcends the current economic downturn, he explained, and will continue after the economy recovers.
There will be "some significant shrinkage" over the next 10 years in the number of people working at banks, Ford said. "I think it's going to be more of the same."
Henry Coffey Jr., banking analyst for J.C. Bradford & Co., a Nashville securities broker, also sees "negative employment growth" at Virginia banks in the years ahead.
Among Virginia's major statewide banks, he said, only First Virginia and Central Fidelity have demonstrated an ability to manage the crisis caused by collapse of the commercial real estate market in the Washington and Tidewater metropolitan markets.
He said there are other banks, which he declined to identify, "whose strength has to be called into question."
Those banks, Coffey said, are having problems that "reflect the reality of their economy."
Perhaps the most significant impact on Virginia banks in 1992 is the entry of North Carolina's NCNB Corp. into Virginia, through merger with C&S/Sovran Corp.
That merger has produced NationsBank, the fourth largest U.S. banking company. Besides the competition from a big player, NationsBank is expected to put a lot of pressure on other banks' ability to cope with soured loans on vacant office buildings, Coffey said.
NCNB's policy is to sell foreclosed property as soon as possible, accepting "anything reasonable" from potential buyers, he said.
So a likely fire sale by NCNB of property it inherits from Sovran bank, Coffey said, will make it more difficult for other Virginia banks to dispose of their own foreclosed properties.
Besides Sovran, banking companies with significant exposure to Northern Virginia's real estate recession include Roanoke-based Dominion Bankshares Corp., Richmond-based Crestar Financial Corp. and Signet Bank.