Saturday, February 4, 2012

REPORT: Prepare For A Giant New Wave Of US Bank Failures

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Forget Europe — the weak U.S. recovery puts more than 750 domestic banks at risk of failure, according to a report from Invictus Consulting Group (via Business Wire).

Invictus, which stress tested all FDIC-insured banks, says 758 lenders could collapse in the next three years, forecasting a new wave of borrower defaults in the absence of a strong economic up-tick.

A disaster in Europe would probably make things much worse.

Invictus says the at-risk lenders — mostly regional banks or subsidiaries of the majors — won't be able to sustain themselves on current earnings, and will likely fail if they don't merge or raise "significant" amounts of new capital.

The banks are spread right around the country, with big clusters in Florida (72), Illinois (69), Georgia (66), Minnesota (37) Missouri (33) and Tennessee (31).

They have total assets of around $440 billion — about $580 million on average — and many of the troubled banks in New Jersey, New York, Pennsylvania, Delaware, Michigan and Massachusetts are worth well in excess of $1 billion.

Invictus says about 200 of the banks are linked to publicly-traded bank holding companies.

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