Experts See More Banks Closing

LOSSES for 1990 reported by some of the region's largest banks reveal the depth of New England's banking crisis. New England's largest bank, Bank of Boston Corporation, lost $395 million in 1990 and will cut another 1,000 jobs. The bank, with $32.5 billion in assets, has about $1.8 billion in nonperforming loans.

Fleet-Norstar Financial Group, of Providence, R.I., lost $48.5 million last year. A close second in size behind Bank of Boston with $32.5 billion in assets, it has $987 million in nonperforming loans.

The region's third-largest bank, Shawmut National Corporation of Boston and Hartford, Conn., lost $133 million in 1990. The bank said it would trim 1,200 jobs and suspend its quarterly dividends. Shawmut's troubled loans total approximately $1.46 billion, while total assets reach $23.7 billion.

BayBanks Inc., with $10.1 billion in assets, lost $69.8 million and will forgo its fourth-quarter dividend. Problem loans grew to $543 million.

Banks and other financial institutions in New England and the rest of the Northeast are among the most troubled in the United States. In 1990, 15 New England banks and thrifts became insolvent and were seized by federal regulators. This year began with the failure of the Boston-based Bank of New England (BNE), one of the largest collapses in US banking history.

Saddled with $3 billion in nonperforming assets, including real estate loans, BNE was taken over Jan. 6 by the Federal Deposit Insurance Corporation (FDIC).

The most troubled banks and thrifts over-participated in the regional real-estate boom of the mid-1980s. They were stuck with billions in bad loans when the boom quickly turned to bust.

While no one knows how long the regional recession will last, financial observers say that another 15 or more institutions may become insolvent before the crisis ends.

Industry analysts say that while the losses reported by the region's largest banks are not good news, none is currently in danger of collapse. All have healthy equity-to-asset ratios above the 3 percent required by the FDIC. These range from around 5 percent at Bank of Boston to around 7 percent at Fleet/Norstar. By comparison, BNE's equity-to-asset ratio was only about 1 percent when fourth-quarter losses eliminated its capital.

``I think we're going to be in for a tough 1991 for the Northeast economy, which will lead in turn to a continuation of problems for banks in New England,'' says Gerard Cassidy, executive vice president of Tucker Anthony, a banking analysis firm.

James Moynihan, managing director of the Northeast bank stock divisions of Advest Inc., says his firm recently studied previous real estate cycles to try to gauge where the economy is now. It found that the difference in housing permits issued was 76 percent from its highest level in the cycle to its lowest. ``That's exactly where we are now. This suggests we are at or very close to the bottom,'' he says. ``My real concern is how far out that bottom might be extended.''

MEANWHILE, Rhode Islanders are still struggling with Democratic Gov. Bruce Sundlun's closure of 45 banks and credit unions Jan. 1 after their private insurer became insolvent. While most of those have since qualified for federal insurance and reopened, 14 remain closed and probably will not qualify, tying up around $1.3 billion in deposits. The governor and state legislators are pushing rival plans to return at least some of the money to depositors.

The news is not bad everywhere. Boston's State Street Bank and Trust Company, which has total assets of $11.7 billion, reported a $117.3 million profit for 1990. But much of State Street's business is in securities services, rather than conventional banking.