Downturn Turns to Regional Banks

Bad news continued to plague financial institutions during the quarterly release season, with WaMu reporting a loss of nearly $1.9 billion.

The Seattle-based thrift reported after the market close yesterday that it had set aside in the fourth quarter a $1.5 billion loan loss provision, a rise of more than 70 percent from $860 million in the same period a year ago. Analysts estimate that 70 percent of WaMu’s home loans are in California and Florida, two of the states hardest hit by the subprime mortgage crisis.

A number of regional banks were hit with similar problems as money center lenders such as Citibank, which announced a loss of nearly $10 billion in the fourth quarter. Investment firm Sandler O’Neill & Partners reported that the seven largest regional banks will see a drop in earnings in the quarter of 66 percent by the time the dust settles.

Pittsburgh-based PNC Financial Services reported net income of $1.5 billion in 2007, down 42 percent from $2.6 billion in 2006. Fourth quarter income fell to $178 million from $376 million a year ago.

PNC recorded net charge offs of $83 million in the fourth quarter, a rise of more than 80 percent from $45 million in the same period a year ago. 

Dallas-based Comerica Bank said its fourth quarter net income fell 60 percent to $119 million. Its provision for losses rose to $108 million, a rise of nearly 500 percent from $22 million in the fourth quarter of 2006. Comerica continues to maintain a large presence in Michigan, its one-time headquarters state that has been bruised by the problems in the U.S. auto industry.

M&T Bank in Buffalo reported its fourth quarter net income fell 70 percent on revenues of $64.9 million, down from $213.3 million in the fourth quarter of 2006. Net income for 2007 was $654 million, down from $839 million.

Huntington Bancshares reported last week it loss $239 million in the fourth quarter primarily due to bad commercial real estate and home loans. The Columbus, Ohio-based bank increased its provision for loans losses to $512 million from $42 million in the third quarter.

Analysts have reported that takeover rumors are floating about WaMu, Atlanta-based SunTrust Bank, National City in Cleveland and other regional banks.