CreditSights, which tracks the dismal data, predicts that in the current cycle, from 2008 through 2011, as many as 1,100 banks will fail. That would wipe out 13.4% of all U.S. banks, representing 7% of U.S. banking assets.
The increasing stream of bank failures is likely to run through 2011 according to some industry experts, as the fallout from the credit crisis continues.
Most of the high profile large banks likely to fail already have, and the backlog of troubled banks now is concentrated at the regional and community level, and is weighed down by commercial real estate and construction loans.
CreditSights' data show that commercial real estate loans made up almost half of all loans at most (80%) of the banks the research firm identified as troubled.
"Another wave of prolonged losses driven by weakness in commercial real estate could prove catastrophic to many of these weakened banks," CreditSights said.
FDIC-insured institutions have set aside just over $338 billion in provisions for loan losses during the past six quarters, an amount that is about four times larger than their provisions during the prior six quarter period, FDIC data show.
As a result, she said, the number of problem institutions increased significantly, to more than 400 during the second quarter.
Now, with unemployment near 10% and credit card default rates about the same, prime mortgage delinquencies are rising, stoking worries among the nation's banks that despite rising stock markets, fundamental banking industry health remains elusive.
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