Bank of trouble climbing in the north-east
The storm of the New England banks is always threatening.
Problems with mortgage to developers, who about a year ago, assembly, so that losses may disability payment for many banks and savings banks in the region. Nonperforming loans at banks in New England almost doubled to 4.3 percent of their assets on June 30, 2.23 percent a year ago, after SNL Securities, a company financial data Charlottesville, Va.
New England now has a higher percentage of nonperforming loans than any other region, the national average is 2.49 per cent. The increase in problem loans are similar to savings institutions in the region.
New offices to cope with problems
The recent failures of four banks in Massachusetts and most successful perspective, the Federal Deposit Insurance Corporation, it plans to open a new branch outside Boston. The office, with a staff of 450, with the multiplicity of problems that arise once the Bank auditor found that the Bank should be closed.
”It is clearly the potential for many casualties bank in New England in the next 12 to 18 months,’’said Gerard S. Cassidy, an analyst specializing in banks in the region in Tucker, Anthony & RL Day, a company Securities in New York.
New England relies heavily on oil for home heating and electricity generation, and the recent rise in oil prices caused by turbulence in the Middle East reduces the amount of money available for other types of expenditure and limit economic growth in this region, analysts expect.
The effect of higher oil prices
”In light of the real estate problems of the region, the potential for failure was not higher oil prices,’’said Cassidy. An increase in oil prices”, the outlook for New England is becoming economic crisis.”
Most loans are agitated for developers that have given rise to many vacancies in their office buildings, housing and other projects because of the weakening of the economy of New England. Given that these high prices affect the economy, it takes even more time for the region of the plethora of real estate projects.
”Things are still very poorly and are likely to remain on course, the nature and for the foreseeable future,’’said Charles A. Shorter, Senior Vice President for the New York office of the Real Estate Research Corporation, a Chicago. Mr shortening estimated that more projects have been completed, spaces stands increase in housing and offices.
The share of losses of the Bank of New England has been low during the last few years. Two banks failed in 1988, four in 1989 and four so far this year.
But there are strong signals that the precarious financial situation of many other banks, according to Veribanc Inc., Wakefield, Massachusetts, bank rating.
In Connecticut, Massachusetts, New Hampshire and Maine, there were 23 banks, whose loss in the first quarter, if it continues at the same pace, wegzaubern capital in less than a year, or whose capital is less than 3 percent of assets.
The capital is a pillow
The amount of capital a bank and its outcome are guides for the financial strength and Veribanc forecasting more banks are doomed to failure. A bank’s capital serves as a buffer at the opening of losses in good health and many banks have capital of 5 percent or more.
An increase in losses for banks foreshadowed New England earlier this month was William L. Seidman, chairman of the FDIC, said that the bank was probably Insurance Fund losing $ 2 billion in 1990, not break, even if it had previously planned this year. Start of reconstruction funds from $ 13 billion at the end of 1989, Mr. Seidman has increased 30 percent to pay premiums guarantee bank deposits.
Although Mr. Seidman did not say where the losses occur bank would be many analysts had expected an increase of New England.
They found that the collapse of many banks in Texas can not take place, more than two years after the birth of their real estate problems.
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