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Tuesday, October 6, 2009

A.M. Best sees 505 'troubled' U.S. banks

Lots of analysts have been warning that the U.S. is just getting warmed up when it comes to bank failures.

Sure, the biggest basket cases were probably addressed, rescued or bailed out (take your pick of characterizations) last fall with the $700 billion Troubled Asset Relief Program.

But the Federal Deposit Insurance Corp.’s running total of failed banks for 2009 is up to 98. The FDIC also says 416 institutions were on its “problem list” as of June 30. (No, the FDIC doesn’t name names.)

Few expect the level of failures to reach what was experienced during the savings and loan crisis of the ’80s and ’90s. That doesn’t mean everything’s fine either.

Credit-rating agency A.M. Best Co. ran its own proprietary model on the 7,476 commercial banks regulated by the FDIC and found that 505 of them could be considered “troubled.” That’s 6.8 percent of all U.S. banks.

What makes for a troubled bank in A.M. Best’s view? Besides having weak capital ratios, it tends to be more exposed to commercial real estate loans compared with industry norms.

Of those 505 troubled banks, 272 are at high risk of failure, according to A.M. Best analysts Tam V. Nguyen and Kevin McFadden.

Oldwick, N.J.-based A.M. Best will not say who’s at risk, but it does say where: Georgia, California, Florida, Illinois and Arizona.

Georgia could have 73 troubled banks on its mind. A.M. Best says 20 are at high risk of failing.

Here, Watchdog

In a speech largely about encouraging innovation to spur cancer-care breakthroughs, AstraZeneca P.L.C. CEO David Brennan renewed a call for more funding for the Food and Drug Administration.

“An understaffed and underfunded FDA is an agency in crisis,” Brennan said Monday at the Medical Innovation Summit in Cleveland.

It may seem odd for the regulated to call for “a watchdog with a full set of teeth,” as Brennan said. But the reputations of the drug industry and FDA have been shredded in recent years.

Sure, everyone want to help patients. But the drug industry, which has done well by doing good (and not so good), wants to be seen as open to change even as it braces for reform.
Posted by Mike Armstrong @ 2:05 AM  Permalink | File Under: Financial Services | | Pharma, Biotech | Post a comment
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About Mike Armstrong
Mike Armstrong, a business editor and writer for nearly two decades, is the Inquirer's business columnist and PhillyInc blog editor. Contact Mike via e-mail or at 215-854-2980
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