Weiss Ratings: U.S. Banking Industry Continues Modest Turnaround

JUPITER, Florida (March 26, 2012) — The U.S. banking industry’s modest turnaround continues, according to a new analysis by Weiss Ratings, a leading independent rating agency of U.S. financial institutions. Increased profitability, growth in loan volume, and a decline in nonperforming loans are among the signs pointing to the industry’s improved performance following the financial crisis that began in 2008.

Deutsche Bank Trust Company Americas, a unit of Deutsche Bank AG (DBK), with a Weiss Financial Strength Rating of A- (“Excellent”); UBS Bank, a subsidiary of UBS AG (UBS), rated B+ (“Very Good”); and Sallie Mae Bank, owned by SLM Corp (SLM), also rated A-, are among Weiss’ top-rated banks leading the recovery.

Gene Kirsch, senior financial analyst at Weiss Ratings, commented: "The latest data suggest that the industry is continuing to make positive strides in its recovery from the financial meltdown of 2008 and its aftermath. Still, while the worst of the crisis may have past, it would be premature to think that we’re completely out of the woods yet.”

Weiss Ratings’ review of fourth quarter 2011 data for 7,305 U.S. financial institutions found that industry profitability increased for the second year in a row, with the industry generating a 0.89% return on average assets (ROAA) in 2011 compared to a 0.65% ROAA in 2010. Both years show a dramatic improvement over the -0.09% ROAA for 2009.

Lending also increased for the second consecutive year. Aggregate loans for all U.S. banks and thrifts rose to $7.47 trillion in 2011, a 1.2% increase over the $7.38 trillion reported in 2010. While lending levels are still lower than before the crisis, loan portfolios have grown an average of $92 to $93 billion per year for the past two years.

“Increased lending has primarily been in commercial, industrial, and farming, with much less growth in the residential sector,” commented Kirsch. “We won’t see a truly robust recovery without solid increases in lending and operating revenues.” 

Loan growth for U.S. banks and thrifts since 2006 is shown below:

Year
Total Loans ($Trillions)
Yearly % Change
Aggregate Change
2011
7.47
1.2%
11.2%
2010
7.38
1.4%
9.8%
2009
7.28
-7.5%
8.3%
2008
7.87
-0.5%
17.1%
2007
7.91
9.4%
17.7%
2006
7.23
7.6%
7.6%
2005
6.72
N/A
N/A
©Weiss Ratings 2012

Banks and thrifts also reported a decrease in nonperforming loans, ending 2011 with $288.1 billion, a 1.8% decline from the $293.5 billion reported at the end of 2010. The percentage of delinquent loans to total loans has declined over the past two years, from the peak of 4.44% in 2009 to 4.15% in 2011, although the industry remains well off its 2007 low of 1.02%.

Moreover, the industry’s improvement is reflected in the distribution of financial strength ratings assigned by Weiss. Following its review of fourth-quarter 2011 data, the number of financial institutions rated B+ or higher — Weiss’ Recommended Banks — rose to 933, or 12.8% of the total, compared to 886, or 11.7%, a year ago.  In contrast, the number of banks and thrifts rated D+ or lower (“Weak”) decreased to 2,092 from 2,707 for 2010. The most vulnerable banks and thrifts, those rated E+ or lower, also declined to 382 from 487.

Weiss Ratings advises bank customers to carefully monitor the health of their financial institutions. For a list of Weiss Ratings’ strongest and weakest large banks, visit www.weissratings.com/banklist.

 

About Weiss Ratings

Weiss Ratings, the nation’s leading independent provider of bank, credit union and insurance company financial strength ratings and sovereign debt ratings, accepts no payments for its ratings from rated institutions. It also distributes independent investment ratings on the shares of thousands of publicly traded companies, mutual funds, closed-end funds and ETFs.