State's biggest banks healthy

Regulators' standards show top five 'well-capitalized'

By David Milstead, Rocky Mountain News (Contact)

Published July 23, 2008 at 9:05 p.m.
Updated July 24, 2008 at 10:59 a.m.

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Chuck Burton / Associated Press

Wachovia Corp. headquarters is shown in Charlotte, N.C. Wachovia said Tuesday it lost $8.86 billion in the second quarter.

Barry Gutierrez / The Rocky

Bill Johnson does his banking at the FirstBank branch in the Republic Plaza in downtown Denver on Wednesday.

Colorado's biggest banks remain healthy by regulatory standards, but each has weathered the current financial storm differently.

Wells Fargo, U.S. Bank and Chase Bank have seen profits decline as the number of bad loans has risen.

Wachovia, struggling with a huge portfolio of mortgages, took a huge loss in the second quarter to try to get its problems behind it.

Locally owned FirstBank, by contrast, has done little mortgage lending and reported a significant boost in second-quarter profits.

Those five banks are the largest in Colorado by deposits, as measured by data from the Federal Deposit Insurance Corp. Four of the five - FirstBank excepted - are large multistate financial companies with a wide range of businesses - from banking to business services, brokerage and investment products.

All five are "well-capitalized" by regulators' standards. Banks are required to maintain minimum levels of capital on their balance sheets. The strictest of measures, core capital, must be at least 6 percent of total assets for a bank to meet the well-capitalized standard.

Even after recent profit declines - and in Wachovia's case, an $8.66 billion loss due in part to writedowns - the banks report core capital at 8 percent of assets or higher. FirstBank's core capital ratio is nearly twice that.

Wachovia acquired much of its mortgage problem by buying Oakland, Calif.-based World Savings Bank in 2006. Wachovia said Tuesday it will cut its dividend to preserve its capital and remain healthy. The bank also said it would cut almost 11,000 positions, including 6,350 currently filled by employees it will have to let go.

"I think that we've taken what we believe are some really clear and instantly measurable steps, which were hard decisions," new Wachovia CEO Robert Steel, appointed earlier this month, said on Tuesday's Wall Street conference call. "We have other levers, should those not be enough, but I think you can hopefully hear the determination to work through this situation and, to the very best of our ability, be thinking about what's best for our shareholders as we work through this."

Wells Fargo, one of the nation's biggest mortgage lenders, took a $1.4 billion charge in November to bolster reserves, due to losses in home equity lending. And its problem-loan numbers look worse when investors consider the foreclosed real estate the bank owns, the product of loans gone bad.

Still, the bank boosted its dividend by 10 percent, and investors were so pleased by the second-quarter results that they sent Wells Fargo stock up 33 percent in a single day. "We're still affected by the weak economy, but we believe we're one of the best-positioned in financial services to grow through this adversity and to build an even stronger company," CEO John Stumpf told analysts.

JPMorgan Chase, parent of Chase Bank, has kept its balance sheet healthy enough to be considered - along with Wells - as a potential acquirer of worse-performing banks like Wachovia. The company already rescued failing investment bank Bear Stearns in March.

"Across the board, we try to be conservative," CEO Jamie Dimon told analysts earlier this month. "We really believe in maintaining a strong balance sheet on all counts, not just strong (core capital)."

FirstBank, meanwhile, plugs along with a different business model.

The bank has $9 billion in assets, a fraction of the four out-of-state banks that have between $250 billion to $1 trillion in assets apiece.

While most of FirstBank's similarly sized peers put two-thirds of their balance sheet into loans, FirstBank puts the majority of its money into high-rated government-backed debt securities.

When the riskiness of assets is taken into consideration, FirstBank's capital ratio comes out nearly twice as high as the big regional banks, making it exceptionally well-capitalized.

Finance Editor David Milstead can be reached at milstead@RockyMountainNews.com or 303-954-2648.

Banks at a glance

Wells Fargo * Headquarters: San Francisco

* Share of Colorado deposits: 17.2 percent

* Second-quarter profits of $1.75 billion are down 12 percent from the first quarter and 23 percent from second quarter in2007.

* Problem loans are 1.02 percent of the bank's assets, but they're up from the first quarter and are at twice the levels of the second quarter in 2007.

* The bank's core capital is up from the first quarter but down slightly from 2007's second quarter. It is well- capitalized by regulators' standards.

FirstBank * Headquarters: Lakewood

* Share of Colorado deposits: 9.0 percent

* Second-quarter profits of $34.4 million are up 22 percent from the first quarter and 43 percent from second quarter 2007.

* Problem loans are 0.15 percent of the bank's assets, but they're up slightly from the first quarter and are three times the level of the second quarter in 2007.

* The bank's core capital is down slightly from the first quarter and from second quarter 2007, but at more than 15 percent of assets, it's nearly twice its larger competitors. It's well-capitalized by regulators' standards.

U.S. Bank * Headquarters: Minneapolis

* Share of Colorado deposits: 8.5 percent

* Second-quarter profits of $950 million are down 13 percent from the first quarter and 18 percent from second quarter 2007.

* Problem loans are 0.59 percent of the bank's assets, but they're up from the first quarter and are at nearly twice the levels of second quarter 2007.

* The bank's core capital is down from the first quarter but the same as 2007's second quarter. It is well-capitalized by regulators' standards.

Wachovia * Headquarters: Charlotte, N.C.

* Share of Colorado deposits: 6.8 percent

* Second-quarter loss of $8.86 billion is bigger than the $664 million loss in the first quarter and a swing from the $2.34 billion profit in second quarter 2007.

* Problem loans are 2.41 percent of the bank's assets, up more than 40 percent from the first quarter and are nearly five times the levels of second quarter 2007.

* The bank's core capital is up from the first quarter and from 2007's second quarter. It's well- capitalized by regulators' standards.

JPMorgan Chase & Co. (Chase Bank) * Headquarters: New York City

* Share of Colorado deposits: 4.9 percent

* Second-quarter profits of $2.00 billion are down 16 percent from the first quarter and 53 percent from second quarter 2007.

* Problem loans are 1.05 percent of the bank's assets, up from the first quarter and more than twice the levels of second quarter 2007.

* The bank's core capital is up from the first quarter and from 2007's second quarter. It is well- capitalized by regulators' standards.

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