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Wall Street pounds state's big banks

Fears of a widening global banking crisis made for a brutal Tuesday on Wall Street, particularly for big banks active in Florida.

Consider the performance of the four largest out-of-state banks that collectively control more than half of Florida's deposits.

Shares in Wells Fargo, Florida's biggest bank thanks to its acquisition of Wachovia, were down 24 percent; ditto the double-digit drop for shares of No. 3 SunTrust and No. 4 Regions Financial.

And for the state's second-largest bank, Bank of America, the scenario was even worse. Shares fell another 29 percent to close at $5.10, compounding a 45 percent slide last week. One analyst estimated the Charlotte megabank, struggling with its Merrill Lynch acquisition, needs at least $80-billion to restore capital to adequate levels.

Bank of America's tumble was seen as one more sign the credit crunch is far from abating. Financial losses from the credit crisis may reach $3.6-trillion, suggesting the banking system is effectively insolvent since it starts with capital of $1.4-trillion, said New York University professor Nouriel Roubini, who predicted last year's economic crisis.

"This is a systemic banking crisis," Roubini said at a conference in Dubai on Tuesday.

Closer to home, Regions Financial on Tuesday blamed troubles in Florida for a 9 percent drop in revenue for its fourth quarter. The Birmingham, Ala., bank posted a net loss of $6.22-billion, or $9.01 a share, on revenue of $1.63-billion in the quarter ended Dec. 31.

For years, Regions counted on Florida as its growth engine, but now it's busy foreclosing on development projects in South Florida in particular.

Regions said its most stressed portfolios were in home building, home equity — mainly second mortgages in Florida — and condo loans.

Although 39 percent of its second mortgage portfolio was in Florida, the state was responsible for 73 percent of its second mortgage charge-offs in the quarter, or roughly $40-million in charge-offs.

Among other financial institutions active here:

• Fifth Third shares fell 22 percent.

• Raymond James Financial dropped 11 percent.

• Shares in Citigroup, which reported a loss of $8.29-billion on Friday, dropped 20 percent to a 17-year low of $3.02. The megabank, which has about 12,000 Florida workers, also dropped its dividend to a penny on Tuesday, matching a move by Bank of America last week.

Times wires contributed to this report. Jeff Harrington can be reached at jharrington@sptimes.com or (727) 893-8242.

Banks, not Obama, drill Dow

NEW YORK — The dawn of the Obama presidency could not shake the stock market from its dejection over the rapidly deteriorating state of the banking industry.

The Dow Jones industrial average fell 332.13, or 4.01 percent, to 7,949.09, its lowest close since Nov. 20, when it ended at 7,552.29 — its lowest point in more than five years. It was also the index's biggest drop since Dec. 1.

During much of Obama's address, the average was down about 150 points. Traders hadn't appeared so focused on TV screens since Sept. 29, when the House initially voted against the banking bailout package and the Dow tumbled 777 points.

The Dow's showing was its worst ever for an Inauguration Day; it has fallen on about three-quarters of Inauguration Days, according to Dow Jones & Co.

Broader stock indicators also fell sharply Tuesday. The Standard & Poor's 500 index fell 44.90, or 5.28 percent, to 805.22, and the Nasdaq composite index fell 88.47, or 5.78 percent, to 1,440.86.

The Russell 2000 index of smaller companies fell 32.80, or 7.03 percent, to 433.65.

Wall Street pounds state's big banks 01/20/09 [Last modified: Thursday, January 22, 2009 3:51pm]
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