Regional banks' results hurt by credit crisis
NEW YORK (Reuters) - The credit crisis weighed on results at six large U.S. regional banks located throughout the country, as they reported lower profits or continued losses.
Profits fell at U.S. Bancorp, which operates in the western two-thirds of the country, as well as at southeast bank Regions Financial Corp and the mid-Atlantic's M&T Bank Corp.
Ohio's largest banks all suffered losses, with National City Corp posting its fifth straight quarterly deficit and Fifth Third Bancorp and KeyCorp their second straight. National City also set plans to cut 4,000 jobs, or 14 percent of its workforce, over three years.
All the banks more than doubled their reserves for loan losses compared with a year earlier, and net charge-offs also soared. Results echoed deteriorating credit at big rivals such as Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co and Wells Fargo & Co.
"This is what happens in a recession, especially one driven by financials and the consumer," said Edward Hemmelgarn, president of Shaker Investments in Cleveland. "Everything always looks gloomiest as banks try to stay ahead of the curve." Nevertheless, he said capital at many banks "is actually in pretty good shape."
Tight credit conditions were one reason U.S. Treasury Secretary Henry Paulson plans to infuse $250 billion of capital into the nation's banks, as part of his $700 billion Troubled Asset Relief Program. KeyCorp said it expects to apply for more than $1.1 billion of capital from TARP, and the other five banks said they may participate in the plan.
"The big picture is continued consumer weakness, which will probably deteriorate further, leading to more credit losses and capital-raising," said Bill Fitzpatrick, an analyst at Optique Capital Management Inc in Milwaukee.
He said KeyCorp, National City and Regions in particular "could be prime beneficiaries of TARP from a capital side."
PROFITS FALL
Profit at U.S. Bancorp fell 47 percent to $576 million, or 32 cents per share.
The Minneapolis-based lender has fared better than most rivals in the credit crisis, and Chief Executive Richard Davis said it has had exceptional deposit inflows in October as nervous depositors flee weaker rivals. Yet the bank set aside more than three times as much as a year earlier for bad loans.
"We are not immune to the challenges of the current environment," Davis said.
Regions, a Birmingham, Alabama, lender, said profit fell 80 percent to $79.5 million, or 11 cents per share.
At Buffalo, New York-based M&T, whose largest investors include Warren Buffett's Berkshire Hathaway Inc, profit fell 54 percent to $91.2 million, or 82 cents per share.
OHIO BANKS POST LOSSES
The net loss at Cleveland-based National City was $729 million, or $5.86 per share, versus a loss of $19 million, or 3 cents, a year earlier.
While the bank lost some deposits in September amid credit market turmoil, it said core deposits have since stabilized, and increased in October. But Chief Executive Peter Raskind said in an interview the economic environment remains tough. "It probably gets worse before it gets better," he said.
Fifth Third, a Cincinnati-based lender, said its net loss including preferred stock dividends was $81 million, or 14 cents per share, compared with a profit of $325 million, or 61 cents, a year earlier.
KeyCorp, based in Cleveland, said its loss from continuing operations was $36 million, or 10 cents per share, versus a profit of $224 million, or 57 cents, a year earlier.
"We have experienced the most severe financial crisis any of us has known in our business lifetime," said Chief Executive Henry Meyer, a 35-year banking industry veteran.
In afternoon trading, U.S. Bancorp shares fell 3 cents, or 0.1 percent, to $31.09; Regions rose 51 cents, or 4.8 percent, to $11.15; M&T rose $3.22, or 4 percent, to $84.30; National City rose 4 cents, or 1.4 percent, to $2.96; Fifth Third fell 62 cents, or 5.1 percent, to $11.61; and KeyCorp rose 81 cents, or 8.3 percent, to $10.55.
(Additional reporting by Juan Lagorio; editing by John Wallace)