Magazine article American Banker

10% of Thrifts Flirting with Failure despite Record 1st Quarter, OTS Says

Magazine article American Banker

10% of Thrifts Flirting with Failure despite Record 1st Quarter, OTS Says

Article excerpt

WASHINGTON - Savings and loans earned a record $1.76 billion in the first quarter, but regulators tempered the good news with a warning: 10% of the industry is flirting with failure.

Jonathan L. Fiechter, acting director of the Office of Thrift Supervision, said Thursday that 183 of 1,802 thrifts,with $117 billion of the industry's $738 billion of assets, are on the agency's problem list.

"If they can't make money in this environment, then clearly they've got relatively severe asset quality problems," Mr. Fiechter told reporters at a news-conference.

"This is really a high number of problem institutions," he said, nothing that only 5% of the bank are on the Federal Deposit it Insurance Corp.'s problem list.

Loses Cited

Mr. Fiechter said 75% of the problem institutions, with about $60 billion of assets, are losing money.

Most of the institutions on the problem list remain solvent. As of March 31, only for insolvent S&Ls remained open, compared with 21 a year ago, 88 in March 1991, and 648 in March 1988.

OTS said thrifts have made money in the last nine quarters. First-quarter earnings exceeded year-earlier figures by 14% and the fourth quarter's $1.1 billion profit by 67%.

S&Ls are making big returns from record interest rate spreads.

Worsening Spread

Mr. Fiechter said the gap between what thrifts pay for money and what they earn has windened continuously for two straight years. At the end of the first quarter, the spread on thrift assets was 302 basis points, 29 basis points above a year earlier. …

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