Stock Market's Roller Coaster Ride Smoothing Out
June 16, 2020
A roundup of Connecticut banks shows little concern with dropping profits for the first quarter of 2020. As expected, most are optimistic to bounce back to 2019 levels.
The Hartford Business Journal reports the COVID-19 pandemic, which struck Connecticut in the final weeks of March, is to blame, as it spurred record poor stock-market performance, forcing banks to write down their investment portfolios, which reduced overall profits, according to recently published Federal Deposit Insurance Corp. data.
The 35 state-based banks analyzed by HBJ saw their collective profits fall 49% in the first quarter to $161 million vs. $317.3 million in net income a year earlier. All but a handful of lenders saw their bottom lines shrink, and about one-third of banks booked a loss, FDIC data shows.
Indeed, the pandemic so far is shaping up to be something far short of apocalyptic for lenders in Connecticut and the Northeast — institutions that tend to carry particularly large capital cushions and that saw lower levels of problem loans in the first quarter compared to banks across the country, said Collyn Gilbert, an analyst and managing director at investment banking firm Keefe, Bruyette & Woods, who covers Waterbury-based Webster Bank and People’s United Bank in Bridgeport.
At Liberty Bank in Middletown, which has $6 billion in total assets, CFO Paul S. Young says the pandemic’s impact has been manageable. The mutual bank’s loan portfolio is diversified, with limited exposure to harder-hit commercial real estate, such as restaurants and retail.
“Most of the real estate [in our portfolio] is essential businesses and they are performing well,” Young said, adding that the mix includes grocery stores.
He was initially worried about Liberty’s approximately $700-million resort finance portfolio, which writes loans for the timeshare industry, but those concerns have largely subsided. “People are paying their loans,” he said. “Customers are prioritizing vacation.”
The Bottom Line
Most financial institutions have tremendous excess capacity in their existing branches today.