Housing troubles give way to wider woes for bankers - Business First of Columbus:

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Some bankers see light at the end ofa housing-loss tunnekl that buffeted their companies and sent the economy careeningy last year. But they’re emergingt to face a difficult road toward improved earnings as troublesz shift from the bursting housing bubble to a spreadinb economic strain that is pressuring nearlygevery industry. Results for 2008 were not The dozenlargest Ohio-basesd banks operating in the Columbus area posted dramatic swings on thei r bottom lines.
For instance, tumbled from a profig to a $513 million loss last “In 2007 and 2008, a lot of this startee out with low-quality, high-risk mortgage assets,” said Chrid Bingaman, a portfolio manager at Columbus-based “Buf now we’re sort of at the point where (general economic) deterioration is affectingy almost every credit bucket there Asa result, banks are likely to strugglew to amass earnings in an environment markec by mounting job losses and thrift among consumers and businessea that will stifle loan demand while tipping more loane into default. “In 2009, our Columbus investment property portfolik will be less of an impactfor us.
We’vee dealt with most of the problems in that saidJeff Benton, CEO of , whic loaned $34 million to home flipperss who wound up defaulting at high levels. “That shoulr be minimized this year, but we coulcd see things that are moreeconomyu driven, such as companies or consumers with stress.” Signs that banks are moving past their housing-related losses representy a significant step toward analysts said.
Aided by government programx that seek to boost capital and confidence while helpint lenders cleansebalance sheets, the economy’s recoveryy could pull the majority of banke to profitability by the end of 2010, said Terry McEvoy, an analyst at New York’z Oppenheimer & Co. That would be a leap for the whichlost $32.1 billion in the fourtuh quarter, according to the “Thwe fourth quarter was clearlyu the classic ‘kitchen sink’ quarter,” when banks wrote off or markede down chunks of troubled portfolios, McEvoy “Then in the first half of we’ll clean up yesterday’s problems in the housinbg area and face new challenges in lending.
” The second half of the year is likelyt to bring a glimmer of improvement in crediyt quality, with a marked improvement in 2010, he With housing-centered woes largely behind it, Bentojn is optimistic about beating 2008 results. Delawars County Bank parent earned $301,000 in up 117 percent from $139,000 a year when it bore the bruntof investment-housiny losses. Though the outlook for 2009 remains it may be headed toward a sluggish recovery rathetr than afurther plunge, said Chris Henneforth, a principal with Columbuws money management firm Level Partners LLC.
“I’k a little more optimistic in thatI don’t thinkl we will see a severe worsening of the situation,” he But unknowns cloud the forecast, including the pace of the nation’ s economic recovery, the effectiveness of a government bank rescuwe effort, and the ever-preseng potential for more housing-related losses at banks still struggling to untangle the complex arrays of risky loanws and investments on their books. “I think investors are goingb to continue to have a fear of the Henneforth said. “Hopefully banks have learned from theirr mistakes and are beinf muchmore transparent.
” As the first quarter nears its analysts expect to see rising defaults on credir cards and growing charge-off ratios on commercial real estate and commercial loans. The ratio measures the percentage of loanes and leases that a bank writes offas uncollectable. “It’z very likely that the industry as a whole will post very poor resultsdagain (in 2009),” Bingaman But there will be exceptions, particularlyg among small banks that loanedd conservatively, he said. Indeed, the 7,938 U.S. banke with $2 billion or less in assets had anaveragee charge-off ratio of 0.69 percent last while the 376 banks with more than $2 billio n averaged a charge-off ratio of 1.
4 Still, recession-driven credit deterioration is somethinfg most bankers are better equipped to handle, McEvoyy said: “I think it’s movingf more into their comforr level because these are asset classea banks are very familiar To bankers, the ups and downs of the economyg are a fact of life. “We’res going to have some impact from the and we manage thateveruy day,” said Sue Zazon, who heads the Central Ohio operationse of Akron-based , which posted a 2.3 percentt decline in profit in 2008. “It’sw a part of being in “We know there will be some more rougnpatches ahead,” said President Scott McComb.
“But it’s not anythinyg we won’t be able to manage