Wal-Mart Bank planned, FDIC holding hearings

Filed under: Banking & Finance |

The Federal Deposit Insurance Corp. has scheduled public hearings next month to discuss Wal-Mart’s application for federal deposit insurance.

Wal-Mart is proposing to create the Wal-Mart Bank, an industrial loan company that would be headquartered in Salt Lake City.

ILCs are state banks that are supervised and insured by the FDIC.

There has been considerable public interest in the application, and the FDIC is counting on participation in the hearings to provide insight into issues raised by the banking industry and the public.

Wal-Mart is proposing opening banks in the Washington, D.C., and Kansas City, Mo., areas, but comment from around the country will be accepted during the hearings because the banks could branch into other states upon approval.

Written statements regarding the matter must be received by the FDIC no later than 5 p.m. March 28, and attendance at the hearing is not required to submit a written statement.

Anyone interested in making an oral presentation during the hearings must deliver a written request to the FDIC no later than 5 p.m. March 10.

The hearings in the Washington, D.C., area are scheduled for 9 a.m. to 5:30 p.m. April 10 and 11. The hearings in the Kansas City metro area are scheduled for 9 a.m. to 5:30 p.m. April 25 and 26. Locations for the hearings will be announced on the FDIC’s Web site.

Investors ignoring 401(k) pool

With 60 million Americans investing $2.5 trillion in 401(k) retirement accounts, you’d think investors would be paying close attention to the vast pool of savings.

But they’re not.

According to the University of Pennsylvania’s Wharton School of Business, the country’s oldest collegiate business school, 401(k) participants in 2003 and 2004 made little effort to tend to their defined-contribution plans once they were set up.

Nearly 80 percent of participants made no trades at all during the two-year period, and 10 percent made only one trade. Even among those who did trade regularly, turnover rates were one-third that of professional money managers.

The findings were reported in the Wharton study, “The Inattentive Participant: Portfolio Trading Behavior in 401(k) Plans.”

Authors of the study say the inertia uncovered by the analysis indicates some positive signs about retirement savings behavior, as well as some concerns.

They were encouraged that participants rarely engage in risky trades based on market timing or other short-term strategies.

However, the study also indicates investors trading through brokerage accounts tend to buy high, sell low and spend a great deal on commissions.

Banks celebrate record year, says FDIC

The Federal Deposit Insurance Corp. is reporting that 2005 was a record year for earnings at the nation’s banks.

Banks reported net income of $134.2 billion for 2005, surpassing the record set in 2004 by $11.8 billion. It was the fifth consecutive year that industry earnings reached new highs.

The industry’s net income for the fourth quarter of 2005 was $32.9 billion – the fourth highest and a $1.7 billion increase compared to the same quarter a year earlier.

Increased net interest income and a boost in non-interest income at larger institutions, particularly from trading and servicing activities, were likely the main factors contributing to the latest annual total.

The FDIC also says that last weekend marked a milestone for the longest number of days during which it did not provide assistance to a failed or failing institution.

The previous record of 609 days spanned January 1945 to September 1946.

Bank of America restates earnings

The United State’s second-largest bank, Bank of America, restated earnings for the last four years after improperly calculating for derivatives

And it was good news for the bank.

The restatement not only resulted in a net gain of $345 million, it also cut net income for each of the last three years and increased earnings for 2002, bank officials said.

The profit increase, however, was less than 1 percent of the $51 billion the bank earned during the period.

Bank of America joins companies, such as Fannie Mae, CIT Group and General Electric, in acknowledging transactions that didn’t comply with regulations governing derivatives – a financial instrument derived from a cash market commodity, futures contract or other financial instrument.

Bank of America said the derivatives were used to hedge against movements in interest rates and currencies. Its restatement increased profit by $707 million for a number of years before 2002, and didn’t affect per-share earnings during that period.

The accounting rule the bank violated is known as “Statement of Financial Accounting Standards 133.”

Rob Larimer covers banking and finance for the Colorado Springs Business Journal.