There were no new banks created in the US in 2011, making it the first year in decades that the country has gone without the establishment of a single start-up lender.
The lack of new or de novo banks underscores the rapidly shifting business environment for US financials and changed attitudes towards the industry after the recent crisis.
A de novo bank is a freshly chartered bank that has not been created through the takeover of an existing institution.
But none of the three new banking charters reported by the US Federal Deposit Insurance Corporation for 2011 were de novos. That is compared with three de novo banks reported in 2010.
“These new banks [chartered in 2011] are takeovers of failed banks,” said Richard Bove at Rochdale Securities. “The question is has any one just come and opened up a new bank? The answer is no.”
The FDIC compiles data on new bank charters handed out to savings institutions and commercial banks, but does not split out which are de novo, making them difficult to track. However, analysis by the Financial Times shows that 2011 was the first year without a de novo bank since at least 1984.
“The number of de novos has been trending down for a few years. There’s a pipeline effect – somewhere between one or two years,” said one analyst. “The lack of de novos now is probably a reflection of public attitudes in 2008.” Other analysts say the still-challenging operating environment for US financials is deterring banking start-ups.
Net income for the banking industry rose 40 per cent in 2011, the FDIC said last week, after banks boosted profits by decreasing the amount of money they set aside to cover bad loans. But operating revenue slumped for only the second time since 1938.
“Investors who create banks do it primarily to make money and the banking business is not as profitable today as it was,” said Gerard Cassidy, banking analyst at RBC Capital Markets. He says that new financial regulation and continued low interest rates are squeezing profit margins at banks.
Others say that new banks are not being created because it is easier to buy failed banks. In 2011, 198 lenders were absorbed through mergers and 92 failed, causing the number of banks and savings institutions reporting to the FDIC to fall by 301 institutions to 7,357 last year.
The three new charters reported for 2011 were the lowest annual number since FDIC records began in 1934.
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