Philly banks: 'Weak' demand, 'intense competition'

The Philadelphia area's surviving banks (those that haven't been absorbed by lenders from second-tier, AFC-type cities, from Pittsburgh, Charlotte, or, lately, Buffalo) have been reduced to retaining homely home mortgage loans on the books, instead of selling them to raise cash for more.

They also face "weak commercial loan demand" in this area, and chronic low interest rates nationwide, writes Jason O'Donnell, bank analyst at Boenning & Scattergood in West Conshohocken, after inspecting the year-end 2011 books at Bryn Mawr Trust, Beneficial Bank, and other local lenders.

The result of the banks' practice of keeping more loans, instead of selling them, is that some banks look on casual inspection like they're lending more, but they're not, really. Which means less money is going into business expansion, hiring, construction...

Commercial and industrial loans actually "contracted" at Bryn Mawr last year, instead of growing, due to "intense competition for quality credits" among banks in the Philadelphia area, O'Donnell added. Despite Bryn Mawr's "superior credit quality" and its relatively low price ($20 a share, vs. his target of $24), O"Donnell cut his profit estimates, due to higher than expected costs. He's not urging clients to buy Beneficial, at least until the bank digests its acquisition of St. Edmond's bank.

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