Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, January 2, 1993 TAG: 9301040152
SECTION: NATIONAL/INTERNATIONAL PAGE: A-2 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
FAILURES OF BANKS, S&LS FALL TO 7-YEAR LOW IN '92
The combined total of bank and savings association failures dropped to a seven-year low in 1992, but analysts aren't sure if the worst is over for the nation's deposit-taking institutions.Regulators said there were 181 failures last year, 122 banks and 59 S&Ls. That's down from 295 in 1991 and less than half the number during the post-Depression peak year of 1989 when 535 financial institutions were declared insolvent.
Last year marked the third consecutive decline in failures and was the best for the industries, in terms of failures and profits, since 1985 when 151 banks and S&Ls closed.
"What people don't realize is that the federal government is much further along in dealing with failed financial institutions than is widely realized," said analyst Bert Ely, a consultant to the Association of Bank Holding Companies.
"With the banks, a lot of the remaining problems were cleared up in 1992," he said.
The $93.8 billion in assets held by 1992's failures - $46.2 billion for banks and $47.6 billion for S&Ls - is more than half of the combined total of $155 billion in 1991.
But some private analysts are still pessimistic. They look at 1992 as the eye of a financial hurricane rather than the end of the storm that soaked financial institutions through the mid- and late-1980s.
"We're in the middle of a decline and it's going to get worse. . . . What we're experiencing now . . . is an unusual circumstance that is allowing banks to report temporary and perhaps illusory profits," said San Francisco economist and writer R. Dan Brumbaugh.
Brumbaugh and other analysts point out that much of the record profits - $24.1 billion for banks during the first nine months of 1992 and $4.05 billion for S&Ls - is being driven by the unusually wide gap between short-term and long-term interest rates.
That means financial institutions can pay the lowest rates since the Depression on their deposits and other liabilities and earn, on average, 4.5 percentage points more on their loans, securities and other investments.
"If interest rates were to narrow unexpectedly next year, say by three percentage points, the profitability being reported by banks would decline to very low levels overnight," Brumbaugh said.
He declined to make a prediction for failures in 1993 but said in the long run, unless Congress restructures the financial system, banks and S&Ls will continue to lose ground to less regulated competitors in the insurance and securities industries.
The Office of Thrift Supervision says that 19 S&Ls with $27 billion in assets are almost sure to fail and others may as well. Ely predicts banks holding $20 billion to $30 billion in assets will fail next year, while the Federal Deposit Insurance Corp. is forecasting the failure of 100 to 125 banks with $76 billion in assets.
\ BANK FAILURES\ Year Banks S&Ls Total\ 1992 122 59 181\ 1991 127 168 295\ 1990 169 217 386\ 1989 207 328 535\ 1988 221 223 444\ 1987 184 47 231\ 1986 138 46 184\ 1985 120 31 151\ 1984 79 22 101\ 1983 48 36 84\ 1982 42 63 105\ 1981 10 28 38\ 1980 10 11 21
Keywords:
YEAR 1992