As one small bank was shut down and two other firms face collapse, negative ratings actions were taken on a number of larger banks because of deteriorating home equity loan performance. But one banking giant managed a record profit despite hefty loan charges. Meanwhile, Countrywide Financial Corp. is under investigation over its financial reporting.
The Justice Department and the Federal Bureau of Investigation are investigating Countrywide for securities fraud, the New York Times reported Sunday — citing anonymous sources. The investigation is trying to uncover whether executives at the company misrepresented its financial condition and the soundness of its loans in public filings.
PrimeTrust Bank and Bank of the South have adopted the name of Pinnacle National Bank, which in November acquired the two organizations’ parent, Mid-America Bancshares. The name changes follow the total integration with Pinnacle.
Despite loan impairment charges of $17.2 billion last year, HSBC Holdings plc reported a record $24.2 billion in profits before taxes for 2007. The London-based bank is the parent of HSBC Finance Corp. — formerly known as Household Finance Corp.
“2007 was a year when large parts of the international financial system came under extraordinary strain,” HSBC Group Chairman Stephen Green said in the report. “Our North American results continue to be adversely affected by high loan impairment charges as we respond to the impact on our portfolio of credit deterioration arising largely from housing market weakness in the US.”
Fitch Ratings announced Friday negative ratings actions on the debt of First Horizon National Corp. and affiliates; National City Corp. and subsidiaries; Provident Bank; PFGI Capital Corp.; Washington Mutual Inc. and subsidiaries; Bank United FSB and affiliates; Providian Financial Corp. and affiliates; Wells Fargo & Co. and subsidiaries; Greater Bay Bank, NA and affiliates; Bank of America Corp. and subsidiaries; FIA Card Services N.A.; United States Trust Company N.A. and affiliates; BankBoston Corp.; Citigroup Inc. and subsidiaries; Nikko Cordial Corp. and affiliates; Fifth Third Bancorp and affiliates; SunTrust Banks Inc.; and National Commerce Capital Trust I.
Fitch cited concerns about deteriorating HEL portfolios and a rapid increase in HEL delinquencies — with losses often reaching 100 percent in California and Florida. Broker-originated HELs are performing considerably worse than direct originations, and loans that didn’t have full documentation are also seeing worse performance.
WaMu’s high concentration of California loans and First Horizon’s concentration of construction and builder loans are especially troubling to Fitch.
Fremont General Corp., which was ordered by the Federal Deposit Insurance Corporation a year ago to exit subprime lending, announced it received a notice of default on at least one of several obligations related to two March 2007 sales of $3.2 billion in subprime loans. The company has failed to provide required financial statements for 2007 to the buyers of those loans indicating at least $250 million in net worth in support of its ability to maintain its repurchase obligations on the sales.
Brea, Calif.-based Fremont is currently evaluating $11 million in repurchase requests.
Thornburg Mortgage Inc., which Friday reported in a Securities and Exchange Commission filing that an overwhelming amount of margin calls had driven it to the verge of collapse, saw its debt downgraded by Moody’s Investors Service and Fitch.
Missouri’s Hume Bank was shut down by the Commissioner of Missouri’s Division of Finance and the FDIC, according to an announcement Friday. Security Bank will assume the failed institution’s $13.6 million in deposits and $2.7 million in assets.
The collapse represents the second FDIC-insured bank failure this year. The other was Douglass National Bank — also in Missouri.
