Friday, September 7, 2012

This Week in Bank Failures

Some recent headlines indicate that bankers and banks are losing status, particularly when it comes to staring down legal difficulties. This is a global trend. Some of bankers’ official problems that couldn’t have happened just three years ago:

  • The Serious Fraud Office is investigating strange-looking payments Barclays made to the Qatar sovereign wealth fund in 2008.
  • A court in Brazil issued an arrest warrant for a banker who failed to appear to testify in a case alleging securities violations.
  • Australia’s high court actually expanded the scope of a class-action suit against one of that country’s giant banks over excessive fees.

Deposit flight from Spanish banks stabilized briefly only to rush ahead again. Spain provided emergency funds to Bankia after it reported losses of €4 billion during the first half of 2012. Spain has reorganized Bankia at least four times so far and is now its majority owner.

Deposit flight is also occurring at the giant banks in the United States, if at a slower pace. It appears that many of the people who meant to move their accounts during Bank Transfer Day last year are just now getting around to it. Many workers wait until they change jobs to change banks, so the trend might continue for some years. The strongest deposit growth this year has been in credit unions.

Hudson City Bank, the largest bank based in New Jersey, has agreed to be sold to M&T Bank for $3.7 billion. The deal gives Buffalo-based M&T Bank a strong East Coast presence for the first time. M&T Bank says it will pay off Hudson City Bank’s debts by liquidating its $13 billion investment portfolio. Hudson City Bank’s profits have lagged because of low interest rates. Hudson City shareholder groups are looking for ways to derail the merger.

Bailed-out ING has been selling just about everything it owns, and now that list includes ING Direct Canada. Scotiabank is the buyer, paying $3 billion in cash, or a premium of 80 percent over the bank’s book value. ING is still looking for a buyer for the much smaller ING Direct UK.

Bank failures are surely slowed down artificially for the current political season in the United States. There was one low-profile bank failure tonight.

The bank was First Commercial Bank, with one location in Bloomington, Minnesota, and just over $200 million in deposits. Kentucky-based Republic Bank & Trust is taking over the deposits and purchasing the assets. It says the new branch office, its first in the Minneapolis area, will make it easier to serve the customers it has already in that area.