News of the Competition

MADISON, Wis. (11/4/09)

• Private equity investors are looking to invest in struggling banks, analysts said. Last week, two Oregon banks--Cascade Bancorp in Bend and West Cost Bancorp in Lake Oswego--announced recapitalization deals in which private equity firms were participating. After injecting $40 million into Cascade, Donald Marron, head of Lightyear Capital LLC, said his group has met with management teams at about 150 mid-size community banks in the past year. Now is a prime time to invest in banks because the principals in the banking industry are more amenable to restructuring units that are economically sound for future gains, than has been the case previously, Marron said. Also, all the new business being conducted is good business, he added. While private equity investors have been reluctant to return to the banking industry because of regulatory obstacles and uncertainty about when the market would bottom out, they now are more comfortable making investments alongside public capital raises, such as stock sales, analysts said (American Banker Nov. 3) ...

• Some large financial firms--such as Citigroup Inc. and JPMorgan Chase & Co.-- are stockpiling cash as if they are expecting another financial crisis to hit, analysts said. CitiGroup has nearly doubled its cash in the past year, amassing $244.2 billion. The four biggest U.S. banks by assets--Bank of America Corp., Citigroup, JPMorgan Chase and Wells Fargo & Co.--have bolstered their combined liquidity by 67% to $1.53 trillion as of Sept. 30 from $914.2 billion in June 2008--before the bankruptcy of Lehman Brothers Holdings, according to the companies' third-quarter reports. The amount is 21% of banks' assets--up from 15%. In addition to cash, liquidity encompasses deposits at other banks and debt securities that can be pledged as collateral in exchange for overnight borrowings from the Federal Reserve or other banks, analysts said (Bloomberg News via American Banker Nov. 3) ...

• Roughly $6 billion in consumer loan-backed deals were expected to be sold before the loan application deadline Tuesday for the consumer loan-backed portion of the Term Asset-Backed Securities Loan Facility (TALF), which is designed to reinvigorate the asset-backed market, analysts said. Bank of America Auto Trust's $2.03 billion deal is the largest bond eligible for the TALF--through which the Fed offers non-recourse loans at low rates. Among the other deals being sold are auto-sector deals from GMAC's Ally Bank with an $884.9 million bond and Americredit Corp. with a $227 million deal (Dow Jones via American Banker Nov. 3) ...

• U.S. banks face risks of significant new loan losses--especially in the commercial loan market--and some banks may not have enough capital to insulate themselves against setbacks, a Federal Reserve official said Monday. "Two years into a substantial economic downturn, loan quality is poor across many asset classes and ... continues to deteriorate," said Jon Greenlee, an associate director of the Fed's division of banking supervision and regulation. Some of the large regional and community banks that have accumulated unusually high levels of commercial real estate loans will be "particularly affected" by conditions in those markets, Greenlee said (Reuters Nov. 2 and Dow Jones via American Banker Nov. 3) ...