Banking Industry Trends Update
The U.S. Banking Industry has recently seen modest improvement. However, great uncertainty remains regarding the magnitude of the industry’s sustainability and recovery due to its interconnectedness with the overall U.S. economy which continues to be unstable. In addition, 2009 has seen a total of 98FDIC-insured bank closures with 50 occurring in the third quarter. The S&P Banking Industry Survey from June25, 2009 cites rising unemployment rates, rising consumer defaults in credit cards, ongoing mortgage defaults, and reduced commercial lending as some contributing obstacles to the banking industry’s recovery.
Another issue facing the industry is the depletion of the FDIC’s Deposit Insurance Fund resulting from the large number of bank failures in the last eighteen months. To rectify this situation the FDIC is requiring member institutions to pay three years’ dues in advance to raise $45 billion tosolve its liquidity crisis and replenish its reserves.
The McKinsey Quarterly released its September 2009 Economic Conditions Survey results that note a general cross-industry trend toward economic recovery. Most of the executives surveyed did not think that they would experience a quick return to their pre-financial crisis revenues and growth rates, but that for many organizations across multiple industries the worst of the crisis is over. Among the financial services industry, the survey noted that only 28% of respondents viewed their organizations to be in crisis. While this number is still high and does not offset the 67% decline from February 2007 in regional banking stock indices, it is a slight improvement from previous counts and hopefully is indicative of moving towards economic recovery in the banking industry. The Federal Reserve Bank of Dallas’ President remarked in a recent interview with the Wall Street Journal that “[r]ight now confidence [in the economy’s ability to survive without Government intervention] is much better than it was when everything ground to a halt. But it is not yet robust.”The opinion that economic conditions are improving but nowhere near optimum levels of stability is prevalent among industry leaders.
Initiatives banks are taking to stabilize and return to profitability largely revolve around internal cost cutting because that is an area the institutions can directly control. Lending scrutiny has obviously increased and several banks have repaid TARP loans in full or are in the process of repaying.
A wide range of financial regulations are also being proposed in Congress including: capping executive pay, creating a consumer protection agency that targets initiatives such as credit card lending,increasing risk and trade monitoring, and increasing capital reserve requirements for banks. It remains uncertain which of these regulations will be passed, but institutions are preparing to implement numerous new industry regulations in the coming months.
The top four U.S. banks will release third quarter results throughout mid-October. According to the Wall Street Journal, analysts are predicting continued losses and declining revenues with some such as Citigroup seeing worse results than previously in 2009. Bank of America Corp. is also expected to report a loss of approximately $630 million while Wells Fargo and JP Morgan Chase are both expected to report profits.
Another issue facing the industry is the depletion of the FDIC’s Deposit Insurance Fund resulting from the large number of bank failures in the last eighteen months. To rectify this situation the FDIC is requiring member institutions to pay three years’ dues in advance to raise $45 billion tosolve its liquidity crisis and replenish its reserves.
The McKinsey Quarterly released its September 2009 Economic Conditions Survey results that note a general cross-industry trend toward economic recovery. Most of the executives surveyed did not think that they would experience a quick return to their pre-financial crisis revenues and growth rates, but that for many organizations across multiple industries the worst of the crisis is over. Among the financial services industry, the survey noted that only 28% of respondents viewed their organizations to be in crisis. While this number is still high and does not offset the 67% decline from February 2007 in regional banking stock indices, it is a slight improvement from previous counts and hopefully is indicative of moving towards economic recovery in the banking industry. The Federal Reserve Bank of Dallas’ President remarked in a recent interview with the Wall Street Journal that “[r]ight now confidence [in the economy’s ability to survive without Government intervention] is much better than it was when everything ground to a halt. But it is not yet robust.”The opinion that economic conditions are improving but nowhere near optimum levels of stability is prevalent among industry leaders.
Initiatives banks are taking to stabilize and return to profitability largely revolve around internal cost cutting because that is an area the institutions can directly control. Lending scrutiny has obviously increased and several banks have repaid TARP loans in full or are in the process of repaying.
A wide range of financial regulations are also being proposed in Congress including: capping executive pay, creating a consumer protection agency that targets initiatives such as credit card lending,increasing risk and trade monitoring, and increasing capital reserve requirements for banks. It remains uncertain which of these regulations will be passed, but institutions are preparing to implement numerous new industry regulations in the coming months.
The top four U.S. banks will release third quarter results throughout mid-October. According to the Wall Street Journal, analysts are predicting continued losses and declining revenues with some such as Citigroup seeing worse results than previously in 2009. Bank of America Corp. is also expected to report a loss of approximately $630 million while Wells Fargo and JP Morgan Chase are both expected to report profits.
Posted by Cassy York at 10/13/2009 8:37 AM 
Categories: uncategorized
Tags: Financial Crisis Banking Industry Marketing Economy Industry Trends
Categories: uncategorized
Tags: Financial Crisis Banking Industry Marketing Economy Industry Trends
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