Atlanta Fed CEO says Southeast banks need more time to heal
The Southeastern region of the nation is on the rebound from the rocky two-year recession, but as banks continue to struggle, the prospects for a full recovery remain on shaky ground, according to Dennis P. Lockhart, CEO of the Federal Reserve Bank of Atlanta.
“I have said repeatedly that stabilization of financial markets is a precondition of a return to economic growth,” Lockhart said Friday at the Alabama Bankers Convention, held this year in Braselton, Ga. “Here in the Southeast, the banking industry still needs more time to heal.”
A growing number of economic indicators recently perked up in the Southeast, which is a sign that the local economy is on the right track, he said in the pre-written speech.
For example, retail merchants in the region are seeing increased traffic and sales, homebuilders indicate that new home sales softened recently but remain above the very low levels recorded at the same time last year. Residential real estate agents have reported a recent increase in existing home sales.
However, some challenges still exist. Commercial property markets continue to experience falling rents and rising vacancy rates, he said.
Also, as some banks continue to struggle, more bank failures in the Southeastern region are imminent, he said.
“I believe that banks are stabilizing and, although not improving rapidly, not getting significantly worse as a group,” Lockhart said. “That said, as I look forward, more bank failures in the region are likely.”
Across Alabama, profits at the state’s banks improved modestly in the past year, he said. Return on assets at Alabama banks collectively rose to 0.41 percent, and the percentage of unprofitable institutions declined to 17 percent.
“This performance is far short of early 2007 the days before the recession,” he said. “In that period, ROA was above 1 percent and only 5 percent of banks were unprofitable.”
On the other hand, asset quality for Alabama banks deteriorated in early 2010 compared with last year. And annualized net charge-offs rose to more than 1 percent of total loans, and 4 percent of loans were noncurrent in the first quarter, he said.
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