Regional banks active in Florida took a beating Monday on Wall Street, thanks to the fear factor.
Wachovia and National City lost nearly 15 percent. Fort Lauderdale's BankAtlantic dropped 25 percent. And Washington Mutual fell almost 35 percent. The broader Standard & Poor's Financials Index dropped to its lowest level since October 1998.
The sell off came amid growing fears about the banking industry's stability following Friday's seizure by regulators of IndyMac Bancorp Inc. Investors are worried because IndyMac, one of the nation's largest savings and loans and a spin-off of Countrywide Financial Corp., was the largest regulated thrift to fail and the second-largest financial institution to close in U.S. history.
That meant open season on banks with significant exposure to mortgages — banks such as Seattle's Washington Mutual and Cleveland's National City. Both sent their public relations machines into overdrive to contain the damage. National City, the nation's 10th-largest bank, said it has experienced "no unusual depositor or creditor activity and has more than $12-billion in excess short-term liquidity."
For its part, BankAtlantic said in a statement it is a "well-capitalized institution under all regulatory standards."
In the meantime, financial analyst Richard Bove of Lutz is trying to figure out which bank will be next to collapse.
Bove, who works for Ladenburg Thalmann, predicts that as many as 150 out of 7,500 U.S. banks may fail in the next 18 months because of rising mortgage defaults.
In a report released Sunday, Bove first looked at all of the Federal Deposit Insurance Corp.-backed institutions and compared each bank's bad loans to its overall assets through two ratios.
Bove ran a second set of numbers dividing a bank's nonperforming assets by its reserves, plus common equity.
High on both lists are three banks that do business in Florida: BankAtlantic, Washington Mutual and Miami Lakes' BankUnited Financial Corp.
In a statement Monday, Washington Mutual said it recently raised $7.2-billion in capital and that the company significantly exceeds all regulatory "well-capitalized" minimums for depository institutions. And a BankUnited spokeswoman said the lender had largely avoided risky subprime loans.
The FDIC does not disclose which banks it thinks are troubled. The agency has $53-billion set aside to reimburse consumers for deposits lost at failed banks.
IndyMac will eat up $4-billion to $8-billion of that fund, the agency estimates, and that could force it to raise more money from the banks that it insures.
However, only six lenders, including IndyMac, have failed so far this year.
"The system is not anywhere near the danger that existed in the late 1980s and early 1990s," Bove wrote, "despite all the whining by public officials."
Information from the New York Times was used in this report.