FWIW:
Local banks: Don't panic; we're fine
Share price sank at two of the largest Florida-headquartered banks amid widespread anxiety over bank stocks as federal authorities tried to calm the market.
miamiherald.com
Posted on Wed, Jul. 16, 2008
BY JANE BUSSEY
jbussey@MiamiHerald.com
Any way BankUnited Financial Corp. President Ramiro A. Ortiz slices the numbers, they don't add up to the punishment the Coral Gables thrift's shares have been taking in the stock market.
Regional and national bank stocks were hammered Tuesday by investors spooked by the failure of Pasadena-based IndyMac Bancorp; problems at Fannie Mae and Freddie Mac, which hold or guarantee almost half of the country's mortgages; and the continuing gloom hanging over the housing and credit markets.
BankUnited stock closed at 43 cents a share. A year ago, it traded at more than $20 -- two years ago, it was above $30 a share. Fort Lauderdale-based BankAtlantic Bancorp's stock also sank to just under $1, down from almost $9 last July and above $14 a share two years ago.
''What's critical is to stop the panic,'' Ortiz said. ``We are very well-capitalized. We don't have subprime loans; we don't have raw land exposure; 40 percent of our mortgages have mortgage insurance.''
The year-old credit crunch and the government's inability to halt the decline have eaten away at confidence in the financial sector. Adding to the pessimism: Many banks are releasing second-quarter earnings this week. The numbers in some cases aren't expected to be good, raising fears of bank failures.
While Federal Deposit Insurance Chairwoman Sheila Bair acknowledged some banks would fail, she said she didn't expect the number to be large. ''The banking system as a whole is absolutely safe,'' Bair said in an interview on CBS.
The FDIC was created in 1933 to prevent a repeat of the Depression by offering deposit insurance to ward off large-scale bank failures.
On Monday, a list of troubled regional banks circulated on Wall Street that included a company that holds stock in BankAtlantic Bancorp. But BankAtlantic took issue with the report by Ladenburg Thalmann analyst Richard X. Bove, calling it ``erroneous.''
''Our losses in our $2 billion residential portfolio are minimal, and yet, because we have a large portfolio, people think the worst,'' said BankAtlantic Bancorp Chairman Alan B. Levan.
With $6 billion in assets, BankAtlantic is one of the largest financial institutions headquartered in Florida, while BankUnited's $14.3 billion in assets makes it the largest banking institution based in the state. Sinking stocks at the two Florida banks mean losses for shareholders but do not directly affect the banks' operations. Ortiz and Levan said there was little they could do but weather the storm.
Regional banks aren't the only ones under pressure. An Oppenheimer Co. analyst Tuesday downgraded Wachovia, one of the nation's largest banks, calling the outlook for shareholders ''bleak'' because the bank's mortgage portfolio will continue to lose value and strain the institution's ability to generate earnings.
Holding high levels of capital is key to bank health in bad times, and even the Ladenburg Thalmann report conceded that most regional banks have the capital to protect them against crushing losses. In addition, deposits up to $100,000 are all federally insured by the FDIC.
In a move to stabilize the markets, the Securities and Exchange Commission issued a 30-day emergency order Tuesday, tightening the rules on the most speculative type of short sales -- essentially negative bets on stock prices -- when trading shares of Fannie Mae, Freddie Mac and big brokerage firms. Fannie Mae and Freddie Mac, both quasi-government institutions, have lost some 70 percent of their value this year.
Meanwhile, police were dispatched Tuesday to quell IndyMac customers -- waiting in line to withdraw their money at branches in suburban Encino and Northridge, northwest of downtown Los Angeles -- after they became irate when others tried to cut in front of them on the second day of the failed institution's federal takeover.
Some analysts and bankers blamed the IndyMac failure on comments from Sen. Charles Schumer, D-N.Y., who publicly questioned the health of the thrift in June.
''Confidence is such an important thing,'' said Miami banking analyst Kenneth Thomas. ``Problems can occur to a good bank if there is a liquidity run.''
Peter Morici, a business professor at the University of Maryland, said there should have been better oversight.
''If the banks had been better supervised, we wouldn't have the credit crisis that we have,'' he said.
''It will take a long time to unwind this mess,'' Morici said. ``The regional banks, if they don't have real estate loans and they don't have bad mortgages, they should be OK.''
This report was supplemented with material from The Associated Press and Los Angeles Times.
 NICK UT/AP
Lillian Krasn, left, and Hanita Horowitz complain about waiting, as some 200 anxious, embittered customers created a Depression Era-like scene in Encino, Calif., as they demanded their money back. |
