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Smaller banks holding up amid crisis
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Kai Ryssdal: The banking industry came in with mixed results today. Or, more properly, I should say the part of the banking industry that gets most of the attention came in with mixed results today. Goldman Sachs and Citigroup both released better than expected quarterly earnings reports this morning. Goldman’s making buckets full of money. Citigroup’s still in the red, just not as badly as everybody expected. So that’s two. Two of the plus or minus 8,000 banks in this country that have to be working right for the economy to get better. We asked Marketplace’s Jeff Tyler how smaller banks, the ones we don’t hear much about, are doing.
JEFF TYLER: The situation for smaller banks is spotty. In parts of the country hard-hit by the recession or the subprime lending mess, savings & loan customers are struggling to pay their debts.
Paul Merski is chief economist with the Independent Community Bankers of America. He says, on the whole, the situation for small banks isn’t so bad, and it’s getting better.
PAUL Merski: The small banks — banks of one billion and under — were the only segment of the banking sector that increased their net loans and leases in the latest quarter recorded by the FDIC.
Merski says community banks are finding new opportunities.
Merski: They are already picking up increased small-business lending opportunities from the large banks, like Bank of America and others, who have dropped big chunks of small-business lending customers.
Individual customers seem to have kept the faith with small banks, says Wayne Abernathy. He’s with the American Bankers Association.
WAYNE Abernathy: Deposit levels have continued to hold up very well.
But he says there’s still some uncertainty.
Abernathy: There are some dark clouds on the horizon that we hope will blow away and won’t come across the industry.
Those clouds include potential new restrictions. He says regulators will say to small banks…
Abernathy: So rather than making that loan, why don’t you hang on to that money because there’s probably some more losses coming at you.
In addition, Abernathy worries about inflation or higher interest rates, either of which could slow banks’ return to profitability.
I’m Jeff Tyler for Marketplace.