FDIC Says Banks’ Loan Exposure Slides

In its Quarterly Banking Profile Report on Tuesday, the Federal Deposit Insurance Corp. reported a whopping decline in bank loan exposure in 2009 compared with the year before, a drop of $587 billion, or 7.5 percent.

February 24, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Omar Omar

In its Quarterly Banking Profile Report on Tuesday, the Federal Deposit Insurance Corp. reported a whopping decline in bank loan exposure in 2009 compared with the year before, a drop of $587 billion, or 7.5 percent. Only part of the decline was due to banks shying away from lending, however.

Banks took charge-offs last year to the tune of about $186 billion, which represented part of the loan-exposure decline, while another part was due to a $54 billion increase in loan reserves. Banks’ equity capital also increased by $177 billion in 2009, according to the report.

As an industry, banks turned in an $12.5 billion profit in all of 2009, a little better than in 2008. But that aggregate masks the problems of many banks: fully a third of all U.S. banks lost money in 4Q09. FDIC chairman Sheila Bair recently said she expected more bank failures this year than last, when the total was 140; the FDIC now counts more than 700 banks on its sickly banks list (“troubled,” the agency calls them). Bum commercial real estate loans will ultimately torpedo many of these banks.

U.S. Home Prices Drop Little in Fourth Quarter

The latest S&P/Case-Shiller home-price index, released on Tuesday, noted that U.S. home prices were down 2.5 percent in 4Q09 compared with the same period in 2008. Compared with the drop in prices between the end of 2008 and ’07, which was an 18.2 percent, it was a modest downtick.

Lately, in fact, prices in the 20 U.S. metro markets that Case-Shiller describes have been edging up–0.3 percent up from November to December, coming after a 0.3 percent increase from October to November.

Are there any major markets in which the index actually went up in 2009? Remarkably, there are, according to Case-Shiller: Boston, up 0.5 percent; Dallas, up 3 percent; Denver, up 1.2 percent; San Diego, up 2.7 percent; San Francisco, up 4.8 percent; and Washington, DC, up 1.9 percent. The index’s biggest loser in ’09 was Las Vegas, which dropped 20.6 percent. No place else was even close, though Tampa lost 11 percent and Detroit was down 10.3 percent.

Consumers a Nervous Lot

According to the Conference Board, consumers still aren’t all that sanguine about the economy or their own prospects. The organization’s consumer confidence index dropped to 46 in February from January’s 56.5.

Did the East Coast snowstorms have anything to do with this? The Conference Board says no, it’s just the lingering Great Recession blues. “Fewer consumers [anticipate] an improvement in business conditions and the job market over the next six months,” Lynn Franco, director of the Conference Board Consumer Research Center, noted in a statement. “Consumers also remain extremely pessimistic about their income prospects.”

Wall Street didn’t take the Conference Board news too well, apparently. On Tuesday, the Dow Jones Industrial Average lost 100.97 points, or 0.97 percent, while the S&P 500 dropped 1.21 percent and the Nasdaq declined 1.28 percent.