State banking revenue increases in first quarter

Filed under: Banking & Finance |

Total revenue for Colorado’s commercial banks insured by the Federal Deposit Insurance Corp. jumped 17.5 percent between the first quarter of 2005 and the first quarter of 2006.
Net income for the state’s 160 FDIC-insured commercial banks was $134 million, up from $114 million during the first quarter of 2005.
Income for the state’s saving’s institutions, however, was unchanged during the same period, at $6 million.
Total deposits at Colorado commercial banks were up 10 percent to $35 billion, and deposits at savings institutions rose 4.7 percent to $2 billion.
Return on assets was 1.3 percent for commercial banks, up from 1.22 percent a year earlier. For savings institutions, ROA was 0.8 percent, up from 0.79.
The percentage of Colorado commercial banks’ non-performing loans to total loans was 0.75 percent, up from 0.69 a year earlier.
For savings institutions it was 1.35 percent, down from 1.95 percent.
Commercial banks’ net interest margin was 4.47 percent during the first quarter, down from 4.49 percent, while at savings institutions it was 3.18 percent, up from 3.09 percent.
Overall, the nation’s 8,790 FDIC-insured banks and thrifts posted record quarterly net income of $37.3 billion, topping the previous quarterly high of $34.6 billion set during the third quarter of 2005.
First-quarter profits were up 9.5 percent, boosted by strong performance at larger institutions and growth in loans for real estate construction and commercial borrowers.
Charge-offs for unpaid consumer loans also dropped sharply during the first quarter following a steep two-quarter rise in charge-offs as individuals hurried to file for bankruptcy protection before new, tougher U.S. bankruptcy rules went into effect last October.
Banks faced net interest margin pressure from rising short-term interest rates. The industry’s net interest margin fell to a 15-year low of 3.46 percent during the first quarter.

IRS changes corporate filing

The Internal Revenue Service announced regulatory revisions last week that will reduce the reporting burden on corporations and shareholders while also making it easier for them to file tax returns electronically.
The changes apply to more than 20 regulations involving corporate and shareholder reporting requirements. A number of the revisions apply to rules governing corporate transactions, such as transfers to a corporation, mergers, spin-offs or liquidations.
For example, Internal Revenue Code Section 351 covers transfers of property to corporations. The code section applies not only to transfers of property to large multi-national corporations but also to transfers of property to small corporations, such as those formed when a partnership or sole proprietorship decides to become a corporation.
Section 351 regulations imposed reporting requirements on anyone who owned a share of a company involved in a Section 351 transfer and on the company itself. Those reporting requirements involved 18 information items from shareholders and 20 information items from corporations.
The revised regulations will limit the Section 351 reporting requirement to only those stockholders who own either 5 percent or more of a public company or 1 percent or more of a privately held company – drastically reducing the number of stockholders who must file a report. Also, the revised regulations will reduce the reportable information to four items: The name and employer identification of the company, the date of the asset transfer, the fair market value and basis of the assets transferred, and the date of any IRS private letter ruling.

Investors betting on China

Based on Associated Press reports, international investors appear to be throwing caution to the wind and jumping at the chance to buy into Bank of China’s initial public offering.
The Bank of China is its nation’s second largest and oldest bank. The IPO is reported to be the world’s largest in at least six years.
But, the bank is still fighting to regain its reputation after several lending scandals.
The Bank of China has an initial market capitalization of about $96 billion, which ranks the bank between Germany’s Deutsche Bank AG and Switzerland’s UBS AG but well behind U.S. banking companies Citigroup and Bank of America.
The bank’s shares will began trading June 1 in Hong Kong, and response so far has been enthusiastic despite recent declines in China’s benchmark economic index.
Long lines formed on Hong Kong sidewalks after the bank announced it would begin offering local investors 1.28 billion shares in the IPO, according to the AP.
Founded in 1912, Bank of China is the country’s most international lender, with branches in 25 countries.
The bank’s $586 billion (U.S.) in assets makes it China’s second biggest after the Industrial and Commercial Bank of China, which plans an IPO later this year. ICBC has assets worth more than $750 billion (U.S.).

Merger gets green light

Philadelphia-based Sovereign Bancorp Inc. said it has received regulatory approval for its three-way merger with Spain’s Banco Santander Central Hispano and New York’s Independence Community Bank Corp.
The approval comes after a five-month fight to block the merger.
Sovereign, the nation’s third largest savings and loan, agreed last year to sell a nearly 20 percent stake to Santander for $2.4 billion and use proceeds to buy Independence for $3.6 billion.
The U.S. Office of Thrift Supervision approved the Independence takeover on March 24.
Rob Larimer covers banking for the Colorado Springs Business Journal.