Magazine article American Banker

4Q EARNINGS: U.S. BANCORP - What Will Happen Next? for CEOs, It's Hard to Say

Magazine article American Banker

4Q EARNINGS: U.S. BANCORP - What Will Happen Next? for CEOs, It's Hard to Say

Article excerpt

Byline: Kevin Dobbs

Whether reporting a profit or a loss, this earnings season bankers have had at least one thing in common: uncertain outlooks for the industry for this year and beyond.

After reporting that U.S. Bancorp's fourth-quarter profit dropped 65% from a year earlier, Richard Davis, its chief executive, said that the economic conditions behind the industry's struggles will remain, and that looking at conditions beyond the next 90 days is a dubious practice.

Mr. Davis said he's seeing diminishing loan demand at his and other banks from people and businesses "spending less and traveling less and watching their nickels and dimes."

At JPMorgan Chase & Co., James Dimon, the New York company's CEO, also blamed macroeconomic trends. After announcing a 76% plunge in fourth-quarter profits last week, Mr. Dimon told analysts that if unemployment soared above 8%, consumer loan delinquencies, particularly on credit cards, could surge.

And that is just the view from companies in the black.

On the other side of the ledger, Kenneth Lewis, the CEO of Bank of America Corp., told analysts that "a severe recession, affecting all sectors of the economy" and driven by receding home prices, rising unemployment, and bankruptcies, makes it "difficult to predict the timing of an economic rebound" and, by extension, the timing of his Charlotte company's return to profitability. It posted a steep fourth-quarter loss last week.

C. Dowd Ritter, the CEO of Regions Financial Corp. in Birmingham, Ala., reported a bruising loss Tuesday and told analysts on a call that the near-term earnings outlook for his firm and most others is bleak.

"As we look out into 2009, unfortunately, I don't see unemployment having reached its peak yet, nor do we see real estate values having bottomed to where they'll start to rebuild, and until we see either of those things, I just can't see bank earnings improving," Mr. Ritter said.

Such pessimism is not isolated to the biggest companies.

"The credit loss numbers continue to get bigger, but I wouldn't call that the most troubling thing," Steve Brown, the president and CEO of Pacific Coast Bankers' Bank in San Francisco, which works with community banks, said in an interview Wednesday. …

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