Several large regional banks reported losses or big profit declines in the first quarter, reflecting sharp increases in soured consumer and commercial loans as the economy deteriorates.
Profit fell at U.S. Bancorp usb, Regions Financial rf and M&T Bank mtb, while Capital One Financial cof, KeyCorp key, Comerica cma and Huntington Bancshares hban lost money. KeyCorp lowered its dividend for the third time in a year. Late Monday, Zions Bancorp zion posted a quarterly loss.
"We're in the eye of the storm," said Matthew Warren, associate director of equity research at Morningstar. "It's commercial loans now where losses are climbing from a low level. If you have below-average capital and are losing money, it is a very fragile place to be."
New Jersey's Hudson City Bancorp hcbk bucked the trend, boosting profit to a record.
The KBW Bank index rose 8.1% after U.S. Treasury Secretary Timothy Geithner told Congress "the vast majority" of banks have more capital than needed.
Even so, declining stock markets and housing prices, rising unemployment and tight credit are causing more consumers and businesses to fall behind on loan payments.
While bank shares have nearly doubled since early March, they are still down 23% this year.
Profit at Minneapolis-based U.S. Bancorp, the nation's eighth-largest bank, fell 61% to $419 million, or 24 cents per share. Analysts on average expected 20 cents per share, according to Reuters Estimates.
"We're probably in the middle" of the economic downturn, Chief Executive Richard Davis said.
U.S. Bancorp added $1.32 billion to loss reserves and expects similar additions in the next two quarters.
Profit at Birmingham, Ala.-based Regions fell 92% to $26 million, or 4 cents per share. Loan losses more than doubled from a year earlier.
Despite surprising analysts last week by projecting a profit, Chief Executive Dowd Ritter said: "I'm not about to suggest the tough times are behind us, because they're not."