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Radically Improved Picture For FDIC Problem Banks ?

ValuEngine Chief Market Strategist Richard Suttmeier is an expert on the US Banking System and uses the health of the system as a leading economic indicator. He distills his thoughts on the banking system in our FDIC Report. The latest update of the report is now available.

For the purposes of this report, "problem banks" are publicly traded FDIC insured financial institutions overexposed to Construction & Development Loans and/or Nonfarm nonresidential real estate loans, with "1-Engine"--Strong Sell, or "2-Engine"-Sell. We also include all other engine-rated banks-- and those with "n/a" ratings but forecast figure data points according to our models-- in violation of FDIC guidelines vis-a-vis loan exposures. Those that are not covered by ValuEngine due to poor fundamentals or because there is no available EPS estimate but are still in violation of FDIC guidelines are also listed at the end of this section as a courtesy to our subscribers..

This table tracks bank ratings and the number of problems bank back to Q3 2009. For January 2013, the FDIC Report shows a big improvement in VE Ratings for banks YOY. In January 2012, more than 60% of the tracked banks were rated SELL/STRONG SELL while today that figure is less than 10%. Many of our tracked banks remain overexposed to C&D or CRE loans and may have maxed out pipelines, but still, that is a remarkable shift. 44% of or tracked banks are now rated a BUY or STRONG BUY. Since last month's report, the situation seems rather stable with only slight variations in the number of institutions rated SELL/STRONG SELL vs those rate BUY/STRONG BUY.

 

Q3 2009

Q3 2010

Q3 2011

Q3 2012

Jan 2011

Jan 2012

Jan 2013

TOTAL BANKS

214

240

304

272

231

305

270

STRONG SELL %

39.3

25.8

35.5

8.5

23.4

16.1

8.5

SELL %

30.8

26.7

26.3

5.5

23.8

46.2

4.4

HOLD %

28.0

44.2

34.9

43.0

43.3

37.0

41.5

BUY %

1.4

2.9

3.0

36.0

9.5

0.7

37.8

STRONG BUY %

0.5

0.4

0.3

7.0

0.0

0.0

6.3

PROBLEM BANKS %

70.1

52.5

61.8

14.0

47.2

62.3

9.3

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.