Friday, November 28, 2008

Stock Performance of Banks Continues to Show Geographic Disparities

A couple of months ago, I made note of geographic variation in the performance of bank shares. Specifically, banks located in regions that had seen greater real estate boom and bust were performing significantly less well in the stock market than banks in real estate markets that had seen no such bubble.

These differences in bank performance continue to be dramatic, despite government efforts to shore up both banks and real estate. The excellent Barchart site tracks the relative performance of industry groups. Banks located in the southwestern and the northeastern regions of the country currently rank #5 and #7 in stock market performance out of over 150 groups. Midwest banks rank #43, southeast banks are #49, and banks in the west rank #98.

By way of comparison, the stocks of 6 out of 15 listed banks in the Southwest are up on the year; 27 out of 80 in the Northeast are green for 2008. In the West, only 4 out of 55 banks are showing annual stock market gains. Indeed, 12 of the 55 banks in the West are down more than 70% for the year. Only 4 of the 80 banks in the Northeast are down that much.

The economic recovery, when it comes, may display significant geographic variation, as weakened banks find themselves more unable to lend money and spur economic activity than banks less saddled with bad loans.