Three Banks, One Struggling Economy
By Alejandro Lazo
Three banks that serve the Washington area offered fresh evidence today that housing market and financial woes are not yet over.
Both ETrade Financial, a New York company with banking operations in Arlington, and Provident Bankshares of Baltimore posted first-quarter losses: $91.2 million and $17.6 million, respectively. And PNC Financial posted an 18 percent drop in profit from the same quarter a year ago.
ETrade Financial, which has the largest market share of customer deposits in the Washington area, according to the Federal Deposit Insurance Corp., posted a loss of $91.2 million (20 cents a share), in the first quarter, compared with profit of $169.4 million (39 cents a share).
The company said the number of nonperforming loans in both its home-equity and residential real estate mortgage-loan portfolios had ticked up from the fourth quarter, though the number of troubled consumer loans on its books had decreased. ETrade said it had set aside $566 million for possible losses in its total loan portfolio, compared with $508 million at the end of the fourth quarter and $68 million one year ago.
ETrade is trying to right itself after the Chicago hedge fund Citadel Investment in November bought its $3 billion portfolio of housing-related securities for about $800 million. As part of that deal, Citadel also lent ETrade about $1.75 billion. E-Trade also said today it was gaining new customers, ending the first quarter with a record 4.8 million total customer accounts.
"We exited the quarter with increased stability and the beginnings of a return to growth," Donald H. Layton, ETrade chief executive, said in a statement.
The loss posted by Baltimore-based Provident Bankshares comes six days after the company said it was raising $115 million from investors to shore up its financial position. The loss compares with a profit of $16.1 million (50 cents a share), posted in the first quarter of 2007. The company said the loss could be attributed to a $42.7 million write-down of its real-estate related investment portfolio, the second consecutive quarterly loss the company has taken due to the falling value of that portfolio.
PNC Financial of Pittsburgh said its profit was $377 million ($1.09 per diluted share) for the first quarter of 2008, compared with $459 million ($1.46 per diluted share) for the first quarter of 2007.
The drop in profit was due to the company increasing its set-aside for potential losses in its portfolio of loans to $151 million compared to $8 million in the first quarter of 2007.
James E. Rohr, chief executive of PNC Financial, told analysts in a conference call this morning that, despite an increase in the number of the company's troubled loans, the bank's performance was positive given the current economy.
"We are in the worst housing market in recorded history of the United States," Rohr said.
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