Analysts blame the liberal credit standards of recent years. Other banks may follow, say analysts, who seem especially worried by the industry's increasing reliance on one-time gains. Many on Wall Street are quick to note that the industry's plight isn't nearly so dire as in the early 1990s, when a flood of soured real estate loans created the most bank failures since the 1930s. But for an industry now reveling in record profits, the fall back to earth could still be hard. Continued strong growth and low inflation should support more lending activity despite higher rates.
Regulators are likely to demand that banks boost capital and write off bad loans.
Both moves would cut profits. Political backlash to ATM surcharges could cut one of the industry's best sources of fee income. The McGraw-Hill Companies Inc. All rights reserved.