The past few years haven’t been the best time to be a bank. One look at the Federal Deposit Insurance Corporation’s (FDIC) list of failed banks over the last 12 years, and you know how bad things have been. But this situation has created opportunity for others. More established names in the banking industry have been on the lookout for such opportunities to grab failed banks in FDIC brokered deals at ‘bargain prices’. In 2008, JPMorgan Chase’s (NYSE:JPM) purchase of Washington Mutual at the peak of the economic crisis. For those wondering why Wachovia does not figure in this list, Wells Fargo (NYSE:WFC) acquired it before an imminent bank failure, saving it the ignominy.
But the FDIC list reveals another interesting fact. There is anther bank out there, which has quietly picked up more failed banks than any competitor – U.S. Bancorp (NYSE:USB).
The table below shows the number of banks that failed since October 2001, requiring the FDIC to step in as the insurer for deposit accounts. In most cases, the FDIC also found a purchaser for the failed bank.
|Year||No. of Failed Banks|
* 2012 figures are up to 10th March
Well over 400 banks have gone belly up since late 2008 – an arguably unprecedented event in the financial sector. However we can’t really blame anyone but the failed banks themselves for throwing caution to the wind with their lending practices that were were not adequately managed or worse not well understood.
Also, when you see that some banks shored up their balance sheet before the crisis to such an extent that even at the worst, they did not have much to worry about. No doubt, they made a conscious decision to stay away from too much risks during the boom – a decision that serves them well to this day. Wells Fargo, in our opinion, is the best example of such a bank.
Another bank that demands a mention here is U.S. Bancorp.
While its quarterly performance numbers in recent years are testimony enough, there is another rather unusual metric that demonstrates its strength – the fact that the U.S. Bank has acquired 14 different failed banks from the FDIC since late 2008. This is higher than any other bank in the country, and does not include the various acquisitions the bank announced and completed over the period directly.