THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Monday, January 20, 1997 TAG: 9701200251
SECTION: BUSINESS WEEKLY PAGE: 17 EDITION: FINAL
SERIES: 1997 FORECAST
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: 64 lines
With an expanding local economy and stable interest rates, Hampton Roads banks can expect another year of strong earnings in 1997.
But the pressure to generate additional business while holding down costs isn't likely to ease. And the rising number of personal bankruptcies in Hampton Roads has clouded the outlook.
``It's something we're keeping an eye on,'' said James F. Babcock, chairman and chief executive of First Virginia Bank of Tidewater. ``We're not alarmed, but the levels of credit-card outstandings are high.''
Most banks have accumulated sufficient capital and reserves to weather a rise in troubled loans, said Vernon Plack, a banking analyst with the securities firm Scott & Stringfellow Inc.
``Banks are in pretty good shape,'' Plack said. ``I expect a solid year, with earnings growth of 8 to 10 percent.''
But those banks with disappointing financial results may find themselves targets of their expansion-minded competitors. The decade-long wave of bank mergers in Virginia will continue through 1997, said David M. West, a banking analysts with the securities firm Davenport & Co. of Virginia in Richmond.
``There's a great underlying drive to become more efficient,'' he said. ``That's the primary reason why there has been so much consolidation.''
For financial institutions in Hampton Roads, a major issue in 1997 will be the continuing battle over eligibility for credit-union membership. Late last year, court rulings restricted the membership pool for credit unions, something that bankers lauded.
Bankers argued that certain credit unions competed unfairly by expanding their membership beyond the core group they initially served while enjoying tax-exempt status.
Credit unions, which are member-owned cooperatives, responded that their tax-exemption and broad membership rules enabled them to deliver low-cost services at a time when banks have been boosting their fees for basic banking. Both sides have embarked on letter-writing campaigns and are lobbying Congress for legislative help.
Faced with heated competition from credit unions, brokerage firms and mutual funds, banks will continue seeking ways to attract customers while controlling their overhead.
Several institutions are spending heavily on alternatives to branches, including bank-by-telephone systems, automated teller machines and software for banking by home computer.
Larger banks have been closing their less productive branches in the region and reducing the number of employees at remaining offices. Other institutions, including CENIT Bank and and Virginia Beach Federal Savings Bank, have resorted to smaller, lower cost branches in supermarkets and discount stores.
Last fall, First Virginia Bank opened a branch in a Wal-Mart Supercenter store in Hampton. Two more of these in-store branches are due to open during 1997. One is planned for a Wal-Mart Supercenter in Virginia Beach in May and another for a Wal-Mart Supercenter in Suffolk in October. ILLUSTRATION: BANK ASSETS
SOURCE: Bauer Financial Reports Inc.
GRAPHIC
[For a copy of the graphic, see microfilm for this date.]
[Color Photo]
[Piggy bank]
KEYWORDS: 1997 FORECAST BANKING