Bank Closing- The saga continues

Bank stocks are coming under increasing pressure on Wall street as more and more banks report earning that are not as expected. Last week the Indymac bank closed after its assets fail below its debts and now even more banks are reporting issues.

BanCorp the largest regional bank in Minnesota has posted not so stellar earnings. Minnesota’s biggest bank, said second-quarter earnings slumped 18 percent and predicted bad loans will continue to rise as more customers fall behind on payments. The shares slid as much as 12 percent on this news.

Net income has declined to $950 million from $1.16 billion a year ago, the Minneapolis-based lender said in a statement today. Most analysts where expected a higher number for Bancorp’s earnings and the fact that they missed this number sent the stock south in a hurry.

U.S. Bancorp expects increased net charge-offs in the third quarter, and “despite this upward trend, credit costs are expected to be manageable,” Chief Executive Officer Richard Davis said in the statement.

U.S. Bancorp has some sort of “safe haven status, that kind of leaves them a little less room for any uncertainty or weakness,” said Sandler O’Neill & Partners LP analyst Scott Siefers. “The good news is when you generate the kind of profitability U.S. Bancorp does, `manageable’ means you can really manage pretty significant deterioration and still turn a profit,” he said.

The bank more than tripled its provision for credit losses to $596 million from $191 million second-quarter 2007. Assets for which U.S. Bancorp no longer received interest rose 34 percent to $1.14 billion from last year as more homebuilders and homeowners fell behind on their payments.

U.S. Bancorp said the amount of debt it doesn’t expect to recoup more than doubled to $396 million from $191 million a year earlier.

This is showing even more weakness in the Banking industry than what was previously expected and this is fueling fears on Wall Street of more significant failures than the Indymac failure and the trouble recently experienced by Freddie Mac and Fannie Mae.

Consumers are growing more and more concerned as this news about possible troubled banks continues to rise. This could mean some really bad times for the US economy and this will of course spill over into the world economy as the US economy continues to weaken.

 

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