FDIC: FYI - An Update on Emerging Issues in Banking 

THE TWENTY FIVE LARGEST BANKING COMPANIES:

Taking Stock of 2001 

This document is based on publicly available information provided by the 

companies it covers. It is intended for informational purposes only and 

does not represent official policy or supervisory guidance from the FDIC. 

February 13, 2002 

Credit quality concerns at large banks took center stage in a year that saw the onset

of recession, the September 11 attacks, the Argentine financial crisis and the 

bankruptcy of Enron, according to FDIC analyses released today. Equally notable was

the stability of bank earnings despite the economic adversity plaguing other parts of

the U.S. economy. This 'FYI' and the accompanying links assemble information from

public sources only -- company news releases, other public disclosures and private 

sector analysts' comments. None of the analyses contain or consider any information

from the supervisory process. Public sources offer a different perspective than that

provided by regulatory monitoring, a perspective that is important for large banks in 

their role as market participants. The results are summarized below and in the 

associated, linked table, "Fourth Quarter, 2001 Chargeoffs and Continuing Loss

Exposure of the Largest 25 Banking Companies." Additional information is presented 

in the FDIC report, "The Twenty Five Largest Banking Companies." 

According to public reports on the twenty-five largest banking organizations that hold 

62 percent of commercial banking industry assets:1

• For the 25 companies as a group, net chargeoffs in the fourth quarter were up

$3.4 billion or 64 percent from a year earlier.

• Despite the higher chargeoffs, net income for the group increased in the fourth 

quarter from year-ago levels by a modest $262 million (the group's quarterly

return on assets declined 4 basis points to 0.98 percent).

• Nonperforming assets for the group were $35 billion at year-end, up 24.9

percent year-over-year.

• Equity capital and reserves for the group exceeded non-performers by a

multiple of more than eleven. (On an individual bank basis that multiple

ranged between 6 and 60.)

• Eleven companies identified specific earnings impacts from Enron and/or

Argentina; chargeoffs attributed to those events were about 30 percent of the

25's total chargeoffs.

• The group's remaining year-end exposure to Enron and Argentina totaled

more than $16 billion.

A 12 to 15 month period often separates the end of a recession and peak loan write 

off activity at banks. This time lag, coupled with an upward trend in corporate 

bankruptcies and debt defaults (including the recent bankruptcies of Kmart and Global 

Crossing), suggests that the banking industry will continue to experience deteriorating 

credit quality. Again, as noted above, the earnings of the top 25 are backed by equity 

and loan loss reserve levels that currently exceed the group's existing nonperforming 
assets by more than a multiple of eleven -- a strong stabilizing influence. 

Totals and Averages of Net Chargeoffs, Net Income Increases and Nonperforming 

Assets of the 25 Largest Banking Companies 

Net Chargeoffs in the Fourth 

Quarter

Increase 

in Net 

Income, 

4Q00 to 

4Q01 

Remaining 

Exposure to 

Enron and 

Argentina

Total 

Nonperforming 

Assets

4Q01 

($millions)

Increase 

from 4Q00 

($millions)

% From 

Enron & 

Argentina 

Losses

($millions) ($millions) (% of 

Equity)

($millions) (% of 

Equity)

Totals and 

Averages 

for all 25 

Banking 

Companies

8,810 3,444 30.42 262 16,614 4.56 35,302 9.69

Source: company news releases, other public disclosures and private sector analysts' comments.

Insofar as adverse events often highlight areas for reform, unfolding problems are 

already presenting an array of candidates. Better anticipation and monitoring of 

overseas exposure, as well as more rapid collection of current and forward-looking 

domestic banking data, have been called for by a number of analysts. On a wider 

horizon, issues have been raised that range from revisiting the issues related to 

appropriate investment concentrations in retirement funds to the need for more 

accounting transparency. In this regard, the ultimate impact of the events of 2001 may 

go well beyond the issue of what numbers appear in quarterly earnings reports. 

1. Includes U.S. based bank or financial holding companies whose banking assets

comprise a significant fraction of their activity; companies headquartered outside of the

U.S., some diversified financial services companies, thrift holding companies and nonbank

financial services companies are excluded.