Veribanc reports on banks' struggle to stay profitable

While the economy remains robust overall, modest continuing slippage is evident at some banks around the country that lend to consumers and businesses, as well as those providing credit to overseas borrowers, according to a recent report from Veribanc Inc.

The difficulties are sufficiently widespread that more banks lost money, both in the fourth quarter and in all of 1998, than at any time in recent years.

So far, the credit card industry has offset the drain of continuing, record problems of nonpayment by customers with fee increases. This new fee income has stanched credit losses with room to spare, the report said.

These findings are based on Veribanc's analysis of the Federal Reserve Board's March 22 release of fourth-quarter call reports for the nation's 9,321 banks. Earlier federal data were also studied.

More banks losing money. Customarily, more banks suffer losses in the fourth quarter than in any other quarter of the year. Last year was no exception, with 1,067 federally insured depositories encountering red ink.

The end of 1998 saw profitability elude the largest percentage of institutions since the crisis year of 1992, when 121 banks failed.

Among this group, those suffering serious quarterly losses have also increased. It has been five years since the industry has seen such a proportion of its institutions so threatened.

The foregoing trend is not confined to the fourth quarter.

When all of 1998 earnings are considered, a greater proportion (5.8 percent) of banks reported losses than for any year since 1992. At that time, 6.9 percent of the industry had negative income for the full year.

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