Connecticut”™s some 50 retail banks cut their combined workforce a whopping 7 percent in the second quarter, as HSBC exits the Fairfield County market, First Niagara Financial Group Inc. absorbs NewAlliance Bank and UBS downsizes its Fairfield County operations, among other changes.
At deadline, Bank of America Corp. was the lone institution to have reported a mass layoff this year to the Connecticut Department of Labor involving 50 workers or more as required by law, the cuts coming in its Hartford-area offices. Businesses not infrequently overlook those notification requirements or dodge them by citing a loophole allowing them to not disclose the data publicly on grounds it would harm their competitive position and states seldom attempt to enforce the rules, which are designed to help workers find new jobs.
Amounting to nearly 1,000 jobs in all as calculated by the Federal Deposit Insurance Corp., the Connecticut banking industry job losses came as net loans and leases plunged by an incredible $4.7 billion between the first and second quarter and as deposits dove 8 percent, or $5.1 billion. The Connecticut Department of Labor reported the state”™s overall financial sector workforce at just more than 133,000 jobs as of July, including insurance, securities and real estate companies, down from 136,000 jobs as of March.
On the flip side, banks continue to chip away at the ratio of delinquent loans in their credit portfolios, which totaled 2.7 percent of all loans outstanding, down from 2.8 percent in the first quarter. And nationally the number of “problem” banks under FDIC oversight fell for the first time in nearly five years. The deposit insurance fund also returned to positive territory, which the American Bankers Association (ABA) said is a clear indication the worst has passed and the industry is returning to health.
“Loan demand remains weak due to the current soft patch in the economy and the lack of confidence is freezing current business expansion plans,” said James Chessen, chief economist for ABA. “The housing market continues to face an oversupply of existing homes and buyers remain hesitant during a climate of uncertainty.”
In Connecticut, the drop in overall loans added up to a major drain in available cash as businesses and residents return from vacation and Tropical Storm Irene cleanup.
Local bank executives will be convening in sunnier climes in a few months ”“ assuming no hurricanes loom on the horizon. Despite federal moneys accepted by some member institutions and getting less money onto the street in the form of loans, the Connecticut Bankers Association again chose Florida as the site of its annual meeting ”“ this go-around in Naples at the glitzy beachside Ritz-Carlton Hotel, where room rates start at just under $700 a night. CBA has continued holding its annual meeting in Florida throughout the recession.
Even as the economy continues to wobble entering autumn, banks are also bracing for the onset of the Durbin amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Among other measures, the Durbin amendment caps the amount banks can charge merchants for each swipe of a customer”™s debit card, exempting smaller institutions from the rule. Still, all banks have been served notice that the new federal consumer protection agency will be eyeballing bank fees going forward.
“I think among the factors impacting revenue growth has been some decrease in revenue fees from the regulatory actions on overdrafts,” said Marty Gruenberg, acting chairman of the FDIC, in an August press conference. “I think that was about $2 billion (nationally).”
