|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
FDIC: Expect More Bank Failures, Financial Institutions' Bleak Q3 Financial Results Doesn't Bode Well For The Agency's 2009 Outlook.
Sarah Johnson
CFO.com. November 25, 2008
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EXCERPT: Third-quarter profits for banks and thrifts declined by 94 percent compared to last year, further calling into question the ability — and willingness — of financial institutions to lend. The aggregate net income for the quarter ended Sept. 30, was $1.7 billion, compared to $28.7 billion earned during the same period in 2007, reports the Federal Deposit Insurance Corp. Almost one in every four institutions insured by the FDIC had a net loss for the third quarter, a period punctuated in its final weeks by the collapse of thrift Washington Mutual, and a liquidity crisis that continues to make corporate borrowing difficult and costly. In announcing the somber — yet not surprising — financial results of the commercial banks and savings institutions they insure, FDIC officials predicted more stress on the banking system next year. "We expect more banks to fail," said FDIC chairman Sheila Bair. The agency now characterizes 171 institutions, with combined asset values of $116 billion, as "problem" institutions. It's the first time in 14 years that bank assets on the FDIC problem list have exceeded $100 billion. So far this year, the FDIC has reported 22 bank failures. With $307 billion in assets, WaMu was the largest failure in the FDIC's 75-year history. Still, Bair said, "most banks remain well-capitalized, profitable, and sound." Only so-called "healthy" banks are eligible to receive a slice of the $700 billion bailout pie under the Treasury Department's Capital Purchase Program. The program allows Treasury to purchase the preferred stock of qualified financial institutions. The CPP, which initially made $125 billion available for stock purchases, is one of the government's recent actions designed to infuse capital into the financial markets. Currently, 30 banks are participating in the program. Bair asked for the public's patience in giving the government's Band-aids time to work. |
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