BankFox Blog

Banks Keep Deteriorating

BankFoxStaff — Wed, 03 Mar 2010 10:27:41 -0500

About 18 months ago, bank failures were at the center of the news as storied financial institutions like Washington Mutual, Wachovia, Lehman Brothers, and Merrill Lynch all disappeared as standalone organizations. Media outlets were abuzz with news of these epic failures or last-ditch mergers.

Today, although bank failures continue to happen, they have become commonplace and less newsworthy, especially as there have been fewer large banks in the mix.

But that doesn’t mean that banks are out of the woods – in fact, according to the FDIC quarterly report that recently came out, banks are in a lot worse shape now than they were 18 months ago when banks were making more headlines.

Some highlights of the FDIC Q4 2009 report:

There are now 702 banks on the FDIC problem list, up from 552 just last quarter, and up from 252 at the end of 2008 when the financial crisis was in full swing.
Overdue loans are up about $25 billion from last quarter to an all-time high of nearly $400 billion.
Banks only increased their reserves to cover losses from these overdue loans by $7 billion this quarter, meaning future losses for banks are likely on their way.

The report did have some positive news though. For example, the overall amount of construction loans that were overdue dropped for the first time in several years.

Such good signs in a gloomy picture like to make us hope that perhaps the worst is behind us, and the industry will turn around soon. However, given some of the statistics in the report, there’s still a lot of evidence that the worse may be yet to come.

PopMoney Gives PayPal Competition

BankFoxStaff — Wed, 03 Feb 2010 13:41:14 -0500

Over the past few weeks, three large banks announced that they launched a new service called PopMoney, a technology that allows consumers to send funds to the mobile phones or email accounts of friends. The service is now available to PNC Bank, FNBO Direct, and First Hawaiian Bank customers, and is similar to a service that Paypal has offered for a while.

The way PopMoney works is that customers login to either their bank web site or mobile phone application, and select the PopMoney option. Next, they enter the email address or phone number of the person to which they wish to send the funds. Finally, they enter the amount of money to be sent.

The recipient of the money then receives an email or text message that provides a code for them to retrieve the funds. From there, they login to the PopMoney.com website via their computer or phone, and enter the code and their own bank’s information. The money is transferred to their bank account within a few days.

This process is essentially identical to PayPal’s “Send Money” feature, but the advantage of using PopMoney instead of PayPal is that it allows customers to send money directly from their own bank account without transferring money first through Paypal as a middle party.

However, unlike PayPal, which allows you to send money for free, some banks are charging the sender every time they send funds through PopMoney. For example, according to their website, FNBO Direct is currently charging customers $2 each time they send funds through PopMoney, and $10 per transaction if they want the money to be delivered the next day. PNC Bank, on the other hand, currently does not charge a fee for sending money according to its press release.

Good Banks With Good Rates

BankFoxStaff — Wed, 06 Jan 2010 14:07:02 -0500

With all of the turmoil in the banking sector in the past year, many have considered switching banks because they’re either worried that their bank will fail, or they’re upset with their bank because it took taxpayer money and yet still awards its managers with large bonuses.

However, it’s often the banks that are least healthy (many of which have been the recipients of government loans) that are willing to offer the highest interest rates to savers because they’re the ones most needing their depositors to stay with them.

For those who are looking to switch their business from unhealthy or greedy banks, yet don’t want to pass up making money, we’ve compiled a short list below of banks that never took any government loans (according to Propublica), but yet are still currently offering among the highest rates on savings accounts as of January 6, 2010.

You can also see our list of all Savings Accounts with their most current rates offered by banks regardless of whether they accepted funds from the Troubled Asset Relief Program (TARP).

Are Bank Profits For Real?

BankFoxStaff — Wed, 09 Dec 2009 18:57:38 -0500

The FDIC recently released its Q3 banking report, and the headliner sounds like good news. According to the report, the overall industry earned a profit of $2.8 billion this quarter compared to a total industry loss of $4.3 billion for the second quarter of 2009.

However, there are reasons to believe these profits are misleading, especially since other statistics show again that the banking industry is getting worse as opposed to better. The report also revealed the following statistics:

Non-current loans (loans in which the borrower hasn’t made a payment in at least 3 months) are at an all-time high, rising from $332 to $367 billion.
The percentage of all loans that are non-current is now at close to 5%, the highest this percentage has been since the FDIC began tracking this statistic 26 years ago.
The amount of reserves that banks have allocated to absorb losses from bad loans relative to non-current loans is at an all-time low, dropping from 64% in Q2 to 60% in Q3.

The last statistic is perhaps the most troublesome. As we’ve mentioned in our posts about bank health during Q1 and Q2 of this year, the amount of reserves that banks set aside is a somewhat arbitrary provision because it represents management’s best guess how much they will actually lose from outstanding loans if they go bad.

It is hard to believe that bank managers now feel that they will need fewer reserves to cover losses from loans going bad. The more realistic explanation why banks are becoming increasingly optimistic about potential losses is that they are trying to appear healthier to raise capital or avoid seizure by the FDIC.

But how overly optimistic are banks being? Let’s consider that the amount of non-current loans went up by about $35 billion this quarter. If banks decided to keep last quarter’s ratio of reserves to non-current loans the same at 64%, they would have increased reserves by about $22 billion. Instead, they only increased reserves by about $9 billion, a $13 billion dollar difference.

Had the industry done that, instead of having a $2.8 billion profit this quarter, the industry as a whole would have lost about $10 billion, much worse than its $4.3 billion loss last quarter.

Thus, the industry swinging to a profit is misleading – it’s clear there are still large losses to be realized and the banking industry is far from out of the woods. In fact, there’s evidence that the industry continues to get worse, not better.

International ATM Fees Differ Dramatically

BankFoxStaff — Wed, 11 Nov 2009 09:26:18 -0500

Planning to withdraw money from an ATM next time you travel abroad? If so, check in advance how much your bank will charge you in fees. Financial institutions differ dramatically in their policies, and you may be surprised at how much you will ultimately pay.

To illustrate these discrepancies, we examined the policies of five popular U.S.-based banks to assess how much it would cost for someone with a minimal balance to withdraw 100 Euros from a foreign ATM. Specifically, we examined three factors - whether the bank charged a fee for using an international ATM, whether a bank charged a currency conversion fee, and whether the bank reimbursed any fees charged by the foreign ATM.

For the sake of our survey, we assumed that 1 Euro was about equal to $1.50 and that a foreign ATM would charge a 2 euro fee for a single withdrawal on average. Here are the estimated costs:

Estimated Costs of Withdrawing 100 Euros

Bank Account	Foreign ATM Fee	Curr Conv Fee	Reimburses Fees	Total Cost
Schwab High-Yield Investor Checking	$0.00	0% ($0.00)	Yes ($0.00)	$0.00
EverBank FreeNet Checking	$0.00	1% ($1.50)	No ($3.00)	$4.50
The Citibank Checking Account	$1.50	3% ($4.50)	No ($3.00)	$9.00
Chase Checking	$3.00	3% ($4.50)	No ($3.00)	$10.50
Bank of America Regular Checking	$5.00	3% ($4.50)	No ($3.00)	$12.50

So depending on the bank, you can expect to pay no fee at all, or end up paying a fee of greater than $10 every time you use an ATM! Thus, before you travel, make sure to check these fees with your bank.

Regardless of fees, it’s also a good idea to contact your bank anyway before you travel in order to notify them that you’ll be using your ATM card internationally. Sometimes if you fail to do this, your bank may deny your foreign withdrawal requests, worried that they may be fraudulent activity.