There is no doubt that big banks hold the power, and according to a recent Wall Street Journal MarketWatch report, this power is growing.
Problem banks have been increasing according to releases from the FDIC, which is expected as financial institutions everywhere are struggling to gain a foothold in the weak economy. Yet the latest reports show some positive signs for the future of the banking industry.
Big Banks Improving
Reports coming out of the FDIC show that as the economy slowly recovers, big banks are recovering
at a faster pace than their smaller competitors. The article points out that a big factor behind the growth divergence can be attributed to non-performing loans. Figures show that larger banks have fewer non-performing loans and therefore are in a better financial position than small banks.
Big banks are flourishing due to their ability to spread their services across different financial customer demands not to mention their ability to provide convenience. Bigger banks can provide more loans and offer more reach with their checking and savings account — not necessarily at a better rate.
Small Banks Strive to Survive
A big indicator of a bank’s health is whether or not they are able to operate on their own. Once a bank seeks to merge with another that is a red flag for financial troubles.
“Smaller banks are seeking out mergers with greater frequency than their larger peers as they struggle to survive. Out of 124 banks absorbed in mergers this year, 107, or 86%, have been those with less than $1 billion in assets, according to the FDIC.”
Comparatively, small banks are not improving as quickly as larger banks, but they are still showing some signs of progress. According to the FDIC capitol reports were increasing across the board and banks were improving their position for lending once the demand was back. Another positive sign: noncurrent and uncollectable loans bank reports have decreased for the second quarter in a row.