Breaking the banks
There’s always room to hope that this year will end up better than last for Tar Heel banks. Things can’t get worse, can they? When Wachovia Corp. was snatched from the brink of failure and sold to San Francisco-based Wells Fargo & Co., more than 40% of Tar Heel deposits went with it, along with the headquarters of what had been the state’s second-largest financial institution.
Other North Carolina banks once seen as rock-solid started to look brittle. Bank of America Corp. net income plunged 73% last year, and it lost $1.8 billion in the fourth quarter. Its stock plummeted 63% after Oct. 1 to close the year at $14.08 — and kept heading south. Two years ago, Blue Ridge Savings Bank, with about $300 million in assets, boasted the best return on assets of any bank among the 100 largest financial institutions based in North Carolina. In 2008, its ROA ranked among the five worst.
At least no Tar Heel banks failed last year. Already in 2009, one — Cape Fear — has, and others — including Blue Ridge — have been warned by regulators to shape up. Even the big banks face challenges. On the day BofA reported first-quarter earnings 11 times better than expected, CEO Ken Lewis sent share prices tumbling with a caveat that “we continue to face extremely difficult challenges primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment.”
Lewis lost one of his titles — chairman — to a shareholder revolt at BofA’s annual meeting April 29, and a strong sense of déjà vu crept over the Queen City. A year earlier, another Charlotte bank chief executive named Ken was stripped of his chairmanship. A month later, Wachovia’s board forced Ken Thompson out as CEO. Four months later came the company’s meltdown. Maybe things can get worse.
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