Sunday, July 13, 2008

The Geographic Distribution of Troubled Banks

After reviewing strong and weak bank performers, I decided to look at banks specific to regions of the U.S. and identify the proportion that have shown weak year-to-date performance. My criterion for weakness was that the stocks had to be down at least 50% year-to-date, much weaker than the broad stock market and weaker than the commercial banking stocks as an entire group. Once again, my hat tip of credit to Barchart for the data:

MIDWEST: 14/57
WEST: 22/55

TOTAL: 57/310

Overall, about 18% of the bank stocks are displaying pronounced price weakness. The highest concentrations are in the midwest, southeast, and particularly the west. It would not be surprising if lending is most curtailed in these areas, as banks build their capital, making economic recovery more difficult.

It is also not surprising that two-thirds of the troubled banks are in the southeast and west, which had been the hottest real estate markets.

These data don't include the major regional banks, savings and loan banks, and banks that are privately held. I don't have data on the latter, but the first two groups display just as much weakness as the banks summarized above, posing a challenge for regulators and for particular regional economies and municipalities.