Magazine article American Banker

As Banks' Earnings Grow, Disparities in Profitability among Regions Shrink

Magazine article American Banker

As Banks' Earnings Grow, Disparities in Profitability among Regions Shrink

Article excerpt

The rising tide of bank earnings has been lifting almost all boats, as regional differences in profitability have shrunk considerably in the past five years.

In the first half, midwestern banks had the highest annualized average return on assets, at 1.41%, according to earnings data released this week by the Federal Deposit Insurance Corp.

While that's higher than the 0.99% return on assets of the least profitable region for banks, the Northeast, the difference between most and least profitable is much smaller than it was in the first half of 1990. Then, banks in the West led the pack with a return on assets of 1.10%, almost three times the last-place Northeast's 0.40%.

"Looking at the patterns (today), it's a fairly uniform type of profile across various types of regions and across asset size groups," said Ross Waldrop, a senior financial analyst with the FDIC.

The Northeast often trails the rest of the country in return on assets because its statistics are dominated by New York's money- center banks, which because of their high-volume business tend to have a lower ROA than smaller banks.

In another measure of profitability, the percentage of unprofitable institutions in the first half, the West was worst with 8.2%, the Midwest best with 1.8%, and the Northeast in the middle at 5.4%.

The bank earnings report also includes indicators of asset quality, and they too show regional differences narrowing.

At the end of June, the Northeast had the highest ratio of troubled real estate assets, at 3. …

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