Troubled Banks Jump Almost 50%... In One Quarter

The Federal Deposit Insurance Corporation has released its list of troubled banking institutions.  As you would have guessed, it is far from pretty.  The FDIC has said that as of the end of Q4 that there were some 252 problem banks, the largest since 1993.  There were 171 at the end of the third quarter.

The FDIC noted $26.2 billion in fourth quarter losses, the first loss since 1990.  The charge-off rate matched the highest on record.  The FDIC also said that the insurance fund lost $15.7 billion in the fourth quarter, and stated the obvious: loans continue to deteriorate.

Sheila Bair also went as far as to say that there are no quick fixes and that troubled loans will continue to rise.  She also noted that there is no sign of asset quality improvement.  None of us expected any improvement there, and most people do not expect things to get better any time soon.

Any guesses as how many troubled banks will be reported at the end of Q1?  Our guess is probably around 325 to 350.  And that is just the “official and what they are willing to admit” level.  We hope that number won’t be accurate.

Jon C. Ogg
February 26, 2009